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marymosley · 6 years ago

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In conversation with Syed Asif Iqbal, co-founder advok8.in on Third Party funding in Litigation

Adv. Syed Asif Iqbal, Advocate, High Court of Delhi who practices in the field of Contracts, Land acquisition, Consumer & Arbitration matters. He is also Co-founder, advok8.in; a technology and Artificial Intelligence driven company making legal profession easier and ensuring access to justice for all.

Interviewed by Anuj Kumar, Founder- Legal Desire

Anuj: Would you like to introduce yourself to our readers?

Asif: In last few years the legal domain has witnessed an acceptance for technology and has created a new branch of professionals, who are lawyers by profession and entrepreneurs from heart. I would like to associate myself in that club.

I graduated in law from Lloyd Law College in 2015 and started practising litigation with some reputed senior lawyers. My practice areas were arbitration, IPRs, consumer and commercial disputes. While I was practicing law I got associated with advok8, which is a legal tech start-up. I was fascinated by the vision of this start-up, which is now an integral part of my life. I also work as an RTI activist and have raised many important issues with the Government. I am glad to share that I also contribute as a columnist for Legal Desire.

I have actively worked on Third Party funding for the past two years and aided in making it a reality for the Indian scenario. As I got the chance to lead Third Party funding with advok8, I tried and was able to develop an indianised version of Third Party funding. I love working on innovations in the legal sector and believe that advok8 will come out with many path breaking developments in the legal sphere.

‌ Anuj: How did you become interested in Legal Innovation and Legal Tech?

Asif: I think the simple answer for this would be the timing. Around 2016, India was witnessing a huge wave of start-ups. OLA, OYO, PAYTM were a few such start-ups who were making it big like never before. Almost in every segment there was disruption. I had been reading daily about them and their success stories when I was approached by advok8 and I just fell for it. Also when you are first generation lawyer you look for a chance to make quick growth in this limited lifespan, while everybody around you will push you to wait for 5-6 years to start something of your own. I believe that if you want to do it, you must make a move for it, and the people around will gradually start accepting it.

‌Anuj: What is Advok8? Tell us about Advok8 and how it all came about?

Asif: Advok8 is a legal cum fintech start-up which is devoted towards making justice and legal services accessible to all at an affordable price.

In the initial stages, advok8 mapped courts, the inflow of cases and the readiness of legal infrastructure to deal with the growing number of cases. Kundan, who is one of the founders of advok8, attempted to understand these potential threats which would hit the Indian legal dispute resolution system in next few decades, and wanted advok8 to be a platform to minimize the harm and reduce the increasing number of cases through technology while promoting access to justice.

‌Anuj: What is the common line that your start-up works on? What is the pain area you want to resolve for people at large?

Asif: The pain area which we want to resolve for people is legal cost.

In my opinion, high legal cost or legal expense is a barrier for access to justice. If the cost of accessing justice is high then the taste of justice for different strata will be different. So, advok8 started helping out litigants with legal cost and making it a neutral factor.

Keeping this is as its mission and vision, advok8 started Third Party Funding in India and is currently working on certain other products to resolve the issue of cost in litigation.

‌Anuj: Third Party Funding has witnessed a sudden rise in India. Tell us about it as you are the first movers?

Asif: Before I discuss more about Third Party funding, I would like to explain it to the readers. Third Party funding is the funding of litigation costs of a claimant, by a funder, in exchange for a share in the successful litigation or settlement amount. There are a few reasons why there is a sudden rise in the popularity of Third Party funding. The first is awareness after the Supreme Court judgment. The second is the interest of international litigation funders in India for exploring the Indian multi-billion dollar litigation market. The third is clarity on law that, unlike other countries Third Party funding was never illegal, so there is no point legalising it. Fourth, India is trying to become an Arbitration hub and Third Party funding accelerates arbitration as a dispute resolution mechanism.

‌Anuj: How you are planning to take Third Party funding to a bigger scale? How does it help individuals and Businesses?

Asif: We need to understand that Third Party funding is not just a necessity for individuals who don’t have money and to fight cases but it is a strategy for businesses to cope with legal costs and expenses. Scaling Third Party funding will require two things; greater involvement of corporates and creating a new investment class where individuals can invest in cases and earn high returns in comparison to any other mode of investment.

Individual are benefitted by Third Party funding as they can avail it to fight for their rightful claims without worrying about the deep pockets of the opposite party. On the other hand, Third Party funding is a tool to manage huge legal costs for businesses. Businesses can improve their EBITDA and cash flow by availing Third Party funding, and by using the previously allocated resources of the legal department in operation.

‌Anuj: Recently you came up with another line of product, tell us about that?

Asif: As we work to make legal cost a less relevant factor for access to justice, we are trying to introduce something by which individuals can pre-plan their legal expenses or cost. Of course, if you can pre-plan your legal expenses, like other potential expenses, your pocket will not get hurt when you face legal problems.

Our product is currently in process and is not ready to be delivered yet. It will take few weeks to hit the market.

‌Anuj: What is your vision and mission?

Asif: Like most start-ups who made elite products accessible to masses by introducing technology in a viable business module, our vision is to provide standardised, affordable and reliable legal services to masses. Our team is also working on introducing AI and ML in certain existing processes which will make legal systems more accessible and efficient. Most importantly, we encourage ADR and ODR as methods of dispute resolution as we would like to prevent petty cases from entering in the system by resolving disputes through ODRs as this will reduce burden of the judiciary.

‌Anuj: What impact do you think your product will have on the society?

Asif: I foresee that over a period of time the most important impact would be a shift in the mindset of litigants or masses about legal disputes.

Today anything related to legal is considered a woe unlike a blessing in the developed nations. Running away from the legal and justice system will not help rather understanding the empowerment it can provide will make us a better nation, because it’s not only rights but also the enforcement of rights that matters in a democracy. If we can contribute in bringing a slight shift in this, we will be happy that we have done something worth.

‌Anuj: Will that help generating opportunities for lawyers?

Asif: Of course, this is one of the most delightful aspects of advok8. We already have a very big network of panel lawyers who are diligently pursuing cases for us and various parties associated to us. With our new line of products we believe that many more opportunities will hit the market specially for young talents, who find it difficult to start their independent practices due to lack of clientele.

To make legal services cost efficient, distribution of cases among lawyers is an important aspect.

Over the period of time a pyramid is formed whereby 80 % of cases are handled by 20% of lawyers in every state. This structure somehow ignores many talented minds and they fail to survive in the long run. We are trying to provide opportunities to those who are in the middle of this pyramid; this will ensure low cost and high quality legal services without effecting the practice of the group at the top.

‌Anuj: What is the real need for this product? Does it target any specific need of the people/society?

Asif: Our services enable access to justice which drives it to be a product for the masses. Here I would like to borrow a famous quote from Robert Kennedy as he said, “The glory of justice and the majesty of law are created not just by the Constitution – nor by the courts – nor by the officers of the law – nor by the lawyers – but by the men and women who constitute our society – who are the protectors of the law as they are themselves protected by the law.”

‌Anuj: What constraints, challenges and opportunities exist in the development, design and usage of Third Party funding?

Asif: Third Party funding has been in existence for a few decades in other jurisdictions, but the legal position was very unclear in India in spite of the fact that no law bars Third Party funding in India. So the biggest constraint was to find the legitimate scope of Third Party funding in Indian legal system. When we entered the market, it took a lot of time and effort to confirm that Third Party funding is legally possible in India. Our second challenge was to communicate that Third Party funding is different from litigation finance by a lawyer, which is not permissible as per the BCI Act. Third, of course, was the trust of people. Nobody believes you when you are a first mover of something. People were very sceptical when we first pitched crowd fund based Third Party funding, however things have started working for us. The traction is encouraging.

The market of Third Party funding is of around 80 billion US dollars in India and with nearly 3.3 crore cases pending in the courts, the opportunity is huge. Therefore, one can find that India is becoming a place of interest for international funders.

‌Anuj: Recently CAM has started “Prarambh”. How do you see it?

Asif: I think it’s a wonderful move and I am really inspired by this step of Cyril Amarchand & Mangaldas. CAM has always taken the lead in shaping the legal sphere. This will encourage students from legal background to get into entrepreneurship with confidence. I think the idea behind this is to create greater acceptance for technology in the legal sector and to make a shift from traditional exhausting processes.

‌Anuj: Do you encourage Entrepreneurship as a career to lawyers?

Asif: Yes, of course! I firmly believe that lawyers can be great entrepreneurs. Aditya Ghosh, who recently joined OYO as CEO, is a role model on how big you can make as an entrepreneur with a legal background.

‌Anuj: How can we deep root entrepreneurship at the law college level? Are you doing something for it?

Asif: The most successful entrepreneurs are coming from IIMs or IITs. The reason behind this is that these institutions celebrate entrepreneurship and innovation. Entrepreneurship is a part of their curriculum. If we want to deep root entrepreneurship in law colleges, we need to make it a part of the curriculum, like moot courts and client counselling. Colleges must encourage Entrepreneurship cells to promote innovations in legal and non legal sectors.

Yes, I am working with some influential leaders who are also entrepreneurs with a legal background, to establish and promote end-to-end entrepreneurial setup for law students. When I say end-to-end I mean that when a law student has decided to take entrepreneurship as a career, he must have multiple opportunities waiting for him in the market.

Anuj: What is your message to young lawyers?

Asif: I will say let’s stop cribbing, blaming the seniors, hoping for clients, planning for independent practices and expecting magic to happen which will change your life. Believe me when I say, that you are the magician in your story. It is human nature that if you compromise once in your life, you will make a habit out of it.

Send your feedbacks/leads for interviews to [email protected]

The post In conversation with Syed Asif Iqbal, co-founder advok8.in on Third Party funding in Litigation appeared first on Legal Desire.

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angrycollectordaze-me-blog · 6 years ago

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Paper代写：Corporate financial crisis management

本篇paper代写- Corporate financial crisis management讨论了企业财务危机管理。财务危机是指企业由于营销、决策或不可抗拒等因素影响，导致企业经营循环和财务循环无法正常持续进行或处于停滞的状态，具体表现为持续性亏损、无偿付能力、违约或破产。面对如今复杂且动荡的经济环境，企业的经营活动经常面临着或大或小的财务危机，如何化解企业在发展中遇到的财务危机，促进企业的稳定发展，保持竞争优势，是企业必须重视的问题。本篇paper代写由51due代写平台整理，供大家参考阅读。

Financial crisis refers to the situation that the business cycle and financial cycle of an enterprise cannot continue or stay stagnant due to the influence of marketing, decision-making or irresistible factors. With the continuous development of society and economy, the trend of economic globalization has become more and more obvious. Meanwhile, the financial environment of enterprises has also undergone tremendous changes. Compared with the previous relatively simple and stable environment, it no longer exists, and the competition between enterprises is becoming increasingly fierce. Facing such a complex and volatile environment, the business activities of enterprises are often faced with large or small financial crises. How to solve the financial crisis encountered by enterprises in development, promote the healthy and rapid development of enterprises, and maintain the competitive edge is a problem that every financial manager must pay attention to.

Financial crisis refers to the situation where the business cycle and financial cycle of an enterprise cannot continue or remain stagnant due to the influence of marketing, decision-making or irresistible factors, which is manifested as continuous loss, insolvency, default or bankruptcy. Market economy made many enterprises, but also eliminated numerous enterprises, under the condition of market economy, enterprise management is full of risks, if things get bad for business development, and become a trend and can not get timely rescue, the crisis will inevitably occur, so the enterprises should strengthen the consciousness of crisis, nip in the bud.

With the continuous development of society and economy, the trend of economic globalization has become more and more obvious. Meanwhile, the financial environment of enterprises has also undergone tremendous changes. Compared with the previous relatively simple and stable environment, it no longer exists, and the competition between enterprises is becoming increasingly fierce. Facing such a complex and volatile environment, the business activities of enterprises are often faced with large or small financial crises. How to solve the financial crisis encountered by enterprises in development, promote the healthy and rapid development of enterprises, and maintain the competitive edge is a problem that every financial manager must pay attention to. This paper will briefly introduce and discuss the financial crisis management of enterprises.

Enterprise financial crisis management refers to that with the turbulence of operating environment, various unexpected emergencies often have an impact on enterprises. In order to effectively prevent and cope with various crisis events and guarantee the financial security of enterprises, various measures must be taken to manage the emergency that endangers the financial security of enterprises. Financial crisis is a fundamental crisis that threatens the sustainable operation of an enterprise. Financial crisis management is an important part of enterprise crisis management. Strengthening enterprise financial crisis management has important theoretical significance and practical value for Chinese enterprises in the starting environment of market economy. On the one hand, it can effectively control and prevent the occurrence of financial crisis. On the other hand, through research and analysis, we can find out the methods and measures to get enterprises out of the financial crisis.

The emergence of corporate financial crisis is closely related to the changes in the internal and external environment of the enterprise. Business activities and financial activities are closely linked. Companies, on the other hand, create value in the cyclical flow of cash. Accordingly, the financial crisis mainly has the following five characteristic

Financial crisis is not a matter of one day, but a gradual process from light to heavy. Accumulating of the financial crisis is the product of financial risk accumulates to a certain extent, in general, the emergence of the crisis is not caused by a wrong decision, but rather a series of decision-making errors is not correct, finally resulting in inability to save the situation, make the enterprise in a certain period of cash inflows cannot meet the needs of capital expenditures, also is what we usually call the financial crisis.

The occurrence of financial crisis is affected by many factors, some of which can be grasped and controlled, but most of which are accidental and difficult to control. For example, all previous financial crises have brought many enterprises into crisis or even bankruptcy. Therefore, the financial crisis has a sudden change.

Financial crises, though many, can be catastrophic for a company, whether technical, corporate, or anything in between.

The diversity of corporate financial crisis is mainly reflected in two aspects. The second is the diversity of financial crisis symptoms. The diversity of causes of financial crisis is determined by the objective nature of the enterprise. The enterprise is a complex system, which is affected by both external environmental factors and internal management factors. The process and reasons are complex and diverse. The symptoms of financial crisis are falling income, poor sales of goods, loss, deteriorating financial ratio, cash shortage, etc.

The life of an enterprise can be changed artificially. It reflects people's will and the life of an enterprise is reversible. In the case of financial crisis, effective reorganization can save the enterprise from crisis. Even when the enterprise enters the stage of bankruptcy, there are some cases of companies that have been reborn after bankruptcy reorganization.

Since the emergence of corporate financial crisis is a gradual process, there must be some warning signs before the occurrence of financial crisis. Just as the so-called "halo and wind, halo and rain", the formation of financial crisis usually has various early performances, mainly in the production and operation, sales and finance.

There are two main aspects: blindly expanding enterprise scale and abnormal inventory changes. For example, during a certain period, the company's fixed assets increased significantly, but its production capacity and marketing capacity were not fully coordinated, which could easily lead to a large amount of capital precipitation and reduced working capital. However, during a certain period, enterprises have a large increase or decrease in inventory, especially the unplanned inventory overhang is an abnormal performance of inventory.

Sales is an important link of capital inflow and a way to achieve profits. Although the causes of the crisis vary, the decline of sales always takes the first place. Therefore, enough attention should be paid to the phenomenon of unexpected decline of sales, deterioration of transaction records, extension of average collection period and weakening of product market power

The key of enterprise financial crisis management lies in establishing a set of procedural financial crisis management system suitable for enterprise development. Its structure mainly includes crisis awareness, organization, early warning mechanism and treatment method.

Enterprises should pay attention to the establishment of advanced crisis theory and strong crisis awareness on the strategic height, and integrate it with the corporate culture, so that it is deeply rooted in the corporate culture, so that every employee can be remembered. Many well-known enterprises in the world have a strong sense of crisis. For example, Microsoft's "bankruptcy is only ten months away" and huawei's "born in trouble and died in comfort" all tell us the importance of building a strong sense of crisis.

Enterprise financial crisis management work by specialized organization should be unified deployment, therefore enterprise should set up headed by enterprise top leadership, by the relevant departments at the grass-roots level management personnel and all departments, exclusively for members of the organization, the head of the enterprise crisis prevention and discovery, and are in danger to a unified deployment, to ensure the safe and stable development of the enterprise.

The establishment and improvement of the financial crisis warning mechanism is conducive to the timely discovery of the signs and symptoms of the crisis, and the eradication of the crisis in the bud, to achieve the purpose of preventing the crisis in the future. The formation of effective early warning mechanism mainly includes the following three aspects: first, select the sensitive early warning indicators in an optimal way, which includes two indicator systems: qualitative and quantitative. Second, improve the statistical analysis system of early warning indicators; Third, strengthen the study of enterprise crisis management, timely identify and judge the symptoms of crisis, and timely take effective measures.

Due to the uncertainty and diversity of financial crisis, it is impossible for us to completely eliminate all financial crises. Therefore, it is not terrible for an enterprise to have a financial crisis. What is terrible is that after the financial crisis, the enterprise does not have a correct method to deal with it. A correct treatment method is very important for an enterprise. It can reduce the property loss of the enterprise as much as possible, solve the crisis as soon as possible, and even turn the crisis into the development opportunity of the enterprise.

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loansinghfinanceblogme-blog · 6 years ago

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Hope you all had a great weekend. There was déjà vu for Nadal, a tournament victory for Team India at the Hero Intercontinental Cup and the countdown to the FIFA World Cup 2018 now shows ‘3 days to go’. Being in the lending space, we receive personal loan applications every day. We received personal loan applications for a monsoon trip to Kerala and there were some who had applied for a personal lifestyle loan to install a fireplace in their home. Lifestyle includes personal fitness, personal financing, home décor, and more.

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Lifestyle Loan

Whenever someone mentions ‘Lifestyle’, there is a sudden influx of posh imagery in our minds. We think of gorgeous cars, suave suits, beautiful homes and traveling in First Class. It is something that we have inculcated through our mindset. Somebody doing well in life is usually thought to enjoy a great lifestyle. But, this isn’t so.

Lifestyle is a way of living among salaried individuals. We don’t try to show off (some might), but it is a way for us to cope with the economy or environments that are physical, psychological and social. Our lifestyle is expressed via work and leisurely activities. Doing so is dependent on how we express our opinion, pursue our interests and handle our income. Lifestyle includes how content and happy we see ourselves to be and what we need to do to maintain or improve this happy state.

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In order to maintain an encouraging lifestyle, you need funds. You may be salaried and even earning well, but there will always be need for credit or refinancing. This is because enjoying a healthy lifestyle requires spending. You might be financially stable, but can you afford to give your home a swanky makeover? Not just financial emergencies, but a specific requirement could need immediate spending. For times and requirements like these, a lifestyle loan is perfect.

You can apply for an instant lifestyle loan to maintain a healthy lifestyle. Loan Singh is a digital lending platform that allows salaried individuals to apply for a personal loan with only Aadhaar, PAN and Bank statement. A digital lending platform needs no paperwork and is devoid of unending delays. A personal loan can also be availed for a number of reasons such as the purchase of household appliances, electronic gadgets, purchase of gold, holiday travel, home improvement, job relocation, medical expenses, home renovation, marriage, etc. The loan amount for a personal loan at Loan Singh ranges from Rs.50,000- Rs.5,00,000. The repayment is done via EMIs, with interest rates on a reducing balance method. The personal loan tenure can be from 3 to 36 months.

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Lifestyle Loan for Home Décor

Home decoration is so important. It not just enhances the home’s aesthetic beauty, but also lets us feel lavish. Whether you want to remodel your home from scratch or decorating it in sections, a lifestyle loan for home décor can help you achieve the desired results. A homeowner will look at his/her home differently. The requirement could be less or more depending upon the work that needs to get into the decoration.

You can make use of a lifestyle loan to conceal design flaws and get it tailor-made as per your requirements. You can give vacant spaces a structured layout, where various elements can be added ranging from expensive wall art, deewan, large mirrors or a new furniture set. Although you can use the approved funding to hire a professional interior designer to transform the look of your home, you can also try out DIY ideas, as you already have the cash borrowed from Loan Singh.

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Home décor can be apt for bedrooms, kitchen, living room, bathrooms, kid’s room, garage, guest room and even kid’s toy room. A proper theme and color combination can help you get the right look. Your taste, style and personality come to the fore. Leave your guests or extended family stunned with your awesome design choices. Salaried individuals nowadays live alone and look for freedom to express their creative ideas. You can set the desired mood or tone, making use of vibrant colors and unique pieces of art. Some really cool home décor styles include contemporary, modern, Asian, Mediterranean, eclectic, Moroccan, vintage, retro, country, Feng Shui, Hippie and Art Deco. You can also mix these styles and create some of your own.

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Lifestyle Loan for Fitness

It’s become so important nowadays to stay fit. Recenty, India’s Sports Minister, Rajyavardhan Singh Rathore set up a #FitnessChallenge, asking individuals to challenge each other to achievable fitness feats. From Virat Kohli to PM Modi, everyone has taken up the challenge, and asked others to complete challenges too via the #HumFitToIndiaFit challenge.

It is a no brainer that one’s lifestyle depends on firstly being fit – physically and mentally, both. You can achieve this by looking after your overall health. The exercise you perform at home can help you stay fresh after a long hard working day at the office. Not just that, a 30-minute walk on your treadmill or lifting weights can reduce the carbs as well. Let’s look at 4 benefits of personal fitness.

Energy Boost

A simple workout or cardio session, done at home, can make you feel energized and rejuvenated. If you are not focusing on your personal fitness, you will feel sluggish and sedentary.

Reduce Weight

Unless you are the Uncleji who went viral for his Govinda dance moves, many of us still feel the urge to lose the paunch. Working out daily at home can simply reduce fat by burning the extra calories.

Building Muscle

For those who want to seriously concentrate on building some muscle, working out at home with a strict regime is a great idea. Even if you don’t want to strain your body too much, you can build a strong and resistant body that helps you fight shoulder pain or back issues. You can achieve a better posture, build muscle balance and improve joint support. Your metabolism also improves.

Mental Strength

You can get mentally strong by including a proper diet to the workout. Elevation of blood flow to the brain increases and helps enhance its functioning. You feel fresh with a spring in your step. Your mood lightens and you tend to become optimistic.

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Lifestyle Loan for Personal Financing

Personal Financing is a financial technique of managing your income effectively, so that you can pay for expenses smartly. It also includes the smart usage of handling a credit card and clearing any debts whatsoever. You will ask, what’s the use of handling income effectively only to go and apply for fresh credit? You must understand that there are products and services which require you to apply for credit. Expenses such as purchase of a used car, spending on a travel holiday and buying a new smartphone will need the added funding of a personal loan. Both credit cards and personal loans are instruments of unsecured credit, and both need prompt repayments to prevent a dip in your credit score.

Personal financing helps you manage your income more efficiently with planning. Managing income helps you understand how to manage investments, monthly expenditures and savings. Monitoring your cash inflow and studying its pattern of expense is important for budgeting. Financial security of your family and prospective retirement plans can all be accomplished by personal financing. When you avail personal loans to pay for fitness, home décor and sudden emergencies, you are actually taking control of your personal finances.

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junseth · 8 years ago

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A Brief History of Bitcoin

The End of the Bitcoin Natural Ponzi

When the World Bank released its whitepaper on Bitcoin back in July 2014, I was astounded by their stupid. Two years later, I’m humbled by their reasonableness. The abstract of the paper begins with what I think is a very reasonable definition of what a Ponzi scheme is:

Ponzis are among the most ubiquitous and least understood phenomena of economic life. They acquired a certain salience with the global financial crisis of 2008 and the crash of Bernie Madoff’s celebrated Ponzi scheme. This paper explains the structure of Ponzi schemes and argues that what makes this such a troubling phenomenon is its ability to be camouflaged amid legitimate practices. It is shown, for instance, that the common practice of giving stock options to employees could be a potential Ponzi that allows corporations to flourish for a while by borrowing from its own future. The paper discusses the need for intelligent regulation to incise harmful Ponzis (not all Ponzis are harmful) while taking care not to damage the legitimate activities that surround them.

The rest of the paper takes a look at the structure of a Ponzi, and defines them as both fraudulent Ponzis, purposely created to bilk investors, and naturally occurring Ponzi schemes that are caused by raw speculation. The paper is not sophisticated in aspect, but I think it is accidentally prescient. Since it’s release, I think that I have come around to the idea that naturally occurring Ponzis are all over the place. Gold might be one such item. It has very few uses, but is value dense, though it’s notable that its value is almost entirely due to speculation. It works well as money because of its scarcity and its nearly utter uselessness for use anywhere else. That said, it relies largely on speculative inflows.

Bitcoin has been, to date, very similar. It’s slow release schedule (mining) ensures scarcity though math + economics. But, honestly, until recently, its value has almost been completely based on inflows of money. Thanks to Libertarians, much of the value was buttressed by an ideological desire to see government crumble at the site of an alternative to fiat. Since those days, I think that the honest among us have come to understand that without government, there is no use for Bitcoin. Because, while the Libertarians provided what amounted to ideology-based price support, as Bitcoin has matured, we have begun to see its use among those who have no alternatives.

The Beginning of a Circular Economy

When Backpage’s credit processing was pulled (AMEX, VISA, Discover, Mastercard etc), Paxful’s Local Bitcoin-like exchange stepped in. The wonder of this is that the girls who sell their escort services on Backpage, are rarely in a position to pivot with regard to the way they earn money. Simply, they are captured by whatever payment mechanism Backpage mandates. So suddenly, these girls needed Bitcoin. A similar phenomenon happened years ago when the Silk Road encouraged users to buy drugs online with Bitcoin. Drug addicts couldn’t use their credit card or cash, for that matter, to buy their poison, they needed Bitcoin. This sort of necessity of use has begun to usher in a new era in Bitcoin’s history, where people’s ideologies are no longer the sustaining force. Bitcoin is seeing the development of a circular economy. And this, I would assert, is the point at which a naturally occurring Ponzi leaves the orbit of Ponzi-planet and enters the outer space of important utility. It is a thing people NEED, and not just a thing people speculate on. I’m not an academic, so I’m sure there is a lot of nuance that I’m missing here. But this is an important distinction between Bitcoin and other blockchain tokens. There are plenty of other criticisms, like Poelstra’s critiques of non-proof-of-work (POS) coins, or the possibility of the existence of 2 proof-of-work chains. These are important, but tangential, technical debates. In this article, I’m going to focus on the fiduciary side of the blockchain critiques, which I think we regularly ignore. And I’ll do it by giving my version of some history that many of you might not have been around for. I guess, in some ways, it’s a bit of accidental Gonzo journalism. I have always been a part of the Bitcoin story. And I can only really tell it from my perspective.

Bitcoin’s earliest mark of distinction is in its rise and rise. From having no articulated value to its famous, and sudden rise to over $1,000 in what seemed like no time at all in 2013. This is following subsequent sudden rises, such as the one that occurred right after Chuck Schumer declared that children could buy drugs on the internet. Shortly after, Bitcoin peaked at around $30 and suddenly dropped back to just over $1. Amidst the crash, Wikileaks declared that it was going to accept Bitcoin for donations.

Dumpy Butts and Fancy Shoes... the Beginning of Everything

There is little doubt that the rise brought with it a wave of speculators. Everyone everywhere heard the news of the once-cheap asset that had made its early adopters ungodly sums of money. Mere weeks after Bitcoin had hit $1,000, the North American Bitcoin conference was underway in Miami. Chris DeRose and I made our way to the event, one of many we would attend throughout the years. There, as Bitcoin hovered around $850, I was astounded by the newly minted millionaires of the ecosystem. Bitcoin had been priced between $7 and $14 not less than a year earlier. It had hit $100 around August. And by January had increased 8-fold.

Yet, there, on stage, a venture capitalist declared that he was an old-timer. “I’ve been in Bitcoin since it was about $100,” he said. “I’ve seen the ecosystem really evolve since then.”

The irony struck me. Everyone here wants to be an early adopter, I remember thinking to myself. While Chris and I had put in our time, we had been watching and playing with and talking about Bitcoin since before Schumer. We were here before the NPR reports. We had paid our dues. And here we were, hearing that old-timer meant arriving only 7 months ago. What’s more is that to date, I remember feeling like I had come to Bitcoin late. I had never thought to call myself an old timer. I felt like I had missed the early days having come around right after Laszlo had bought the Bitcoin Pizza for 10,000 BTC. And here, on stage, a Venture Capitalist had the tenacity to declare himself an old timer.

The conference might have been one of the most remarkable conferences in the history of the space. The rise of Bitcoin had given a number of people enough money to make the flight from wherever they were. The chairs were replete with 16 year olds dressed in new, odd, but very expensive clothes. Ridiculous Givenchy shoes, Armani suits, or clothing that could have at least passed for it, adorned the backs of everyone in the conference who had, just weeks before, never needed to cope with the trappings of wealth. What’s more, for those that could reflect honestly, many of their earnings had come from the change they had kept around after purchasing drugs on the Silk Road or other darknet markets.

The fevered pitch of anarchic dilettante was pervasive. We all discussed ending the fed, the evils of inflation, and we generally agreed that our purchase of tickets had landed us on this or another watch list of sorts. At the conference Vitalik Buterin, a young boy around whom there was no mythic glow, took the stage and described a system he was working on called “Ethereum.” A group of developers who had put together a project called colored coins did a presentation, as did Neo & Bee. Charlie Lee took the stage in another room and discussed Litecoin, what people at the time referred to as the silver to Bitcoin’s gold. And then there was the special guest. Bernard von NotHaus, creator of the Liberty Dollar. He was in between his trial and sentencing, and had made the trek to Miami to be a secret speaker. He made brazen challenges to the feds whom he said he was certain were in the room watching him and us. But his speech had almost nothing to do with Bitcoin, and amounted to little more than an anti-government screed lauding the Libertarian mentality steeped in the likes of Bastiat, Hayek, and Mises. At this point, I was familiar, and even excited about the underlying assumptions: there is good money; there is bad money; gold is good money; government taxes are theft.

The party that evening was a festival filled with pretty girls, surrounding a dumpy, tall man whose pants didn’t fit very well around his butt. He commanded a group of people as he spewed what sounded like nonsense. He was touting his new bank-killer Bitcoin-like app called Bitshares. I remember being completely perplexed by the marketing. It seemed like they had a ton of money, and I couldn’t figure out exactly what it was, but it smelled fishy. Was it a Bitcoin bank? Was it a different blockchain? No one who heard the pitch knew. But everyone seemed to think it was going to make them some money. Since then, I think that most of us have become very familiar with Bitshares. And I think this is where our story begins. Because reflecting back on this conference, I think I realize that this is where much of the modern narrative about Bitcoin began, and this is where everything went wrong... and right.

Before the conference, scams and schemes had abounded. The pirateat40 Ponzi scheme, Tradefortress and his/her problems, Bruce Wagner and the MyBitcoin.com theft, Bitcoinica, and many many smaller schemes had all come and gone. Some of the problems with getting money into Bitcoin had been solved by Gox and Shrem’s BitInstant. BitStamp had come around. Coinbase came around. And the market started to mature. To date, however, most of the scams had been Bitcoin-based. There had been a few alt coins launched including Litecoin. But they were mostly an afterthought. At the time, no one really knew what this thing was. We were all pretty convinced that altcoins had a place in the ecosystem. I remember even discussing with Chris the possibility of setting up endpoints around town at Starbucks coffee shops and using their internet to mine TorCoin. This is a fact I am a bit embarrassed to admit, but I think that it would be imprudent to wash my own history here. TorCoin’s proof of bandwidth consensus mechanism is (I’m sure) as stupid as it sounds. But back then... how could we have known?

And that’s what happened to everyone. People showed up, they looked around, and they were struck by the magical superpowers endowed to anyone with a penscient for the Dunning-Kruger complex. I summed it up years later, with the now well-used Bitcoin meme, “I Just Heard About Bitcoin... I’m Here to Fix It.”

This is the mentality of everyone who looks at Bitcoin. It’s a large, inefficient data structure, that requires massive amounts of energy to be burned in order for it to work. All of this happens to be for very good reason. In fact, I might go so far as to say that Bitcoin is big and unwieldy for the same reason that government is big and unwieldy. The problem it solves, the Byzantine General’s problem, is a corruption problem. And, as any regulator will tell you, the way to do deal with corruption is to develop massive infrastructures for rooting it out. Bitcoin is the un-regulated example of this. Its infrastructure costs are a software’s version of compliance costs. But those inefficiencies, to a newcomer, look like opportunities. And while, I think, simple abstractions like this one can get ridiculous, this is the closest I’ve come to making the necessity of the inefficiency of a blockchain simple to understand.

Larimer’s Moonshot and the Beginning of the Miami Bitcoin Meetups

When Larimer, the man with the dumpy butt who commanded attention for Bitshares back at The North American Bitcoin Conference, launched his blockchain it was the beginning of a new era in Bitcoin, I think. When Bitshares’ blockchain launched, the price began to rise. Up and up and up it went. What it was for, nobody really knew. All anyone would say is that it was a better, newer version of Bitcoin. Bitcoin was the old Model-T, Bitshares was a new shiny Ferrari. It rose to a value of just under $90 million in short order. Other coins, at the time, had reached impressive heights. Doge Coin had a much vaunted rise not so long before this, AuroraCoin was apparently worth $367 million in March of 2016, and there were numerous other coins that had made a mark on the ecosystem. But none had seemed so cultish to me as Bitshares.

It was around this same time that Chris and I began running the South Florida Bitcoin Meetups. It was our first real view into the Bitcoin ecosystem escaped from the insularity of our shared office space. We had new Bitcoiners coming every week, and we noticed that all of them would follow the same journey. They would come to get rich, asking questions about mining. We were uneducated in the subject of mining, but were pretty sure that it was not a good idea based on our having seen hundreds of people lose their shirts trying to build mining operations. It is largely unknown that DeRose and myself had strongly considered mining Bitcoins back in 2012, though we had decided against it (thankfully). We would have the occasional miner show up, and they would tell us all about their setup. The local hobbyist miners were always the most arrogant. And they always seemed to know the least about the subject matter.

Then There Was James...

James was a Bitshares believer. James was a family man. James had a wife, a kid, and was doing his best to provide for them. James got sucked into the Bitshares phenomenon, each week coming to the meetings giving us updates about the Bitshares blockchain. James was a programmer, and James knew what blockchains were. He was a competent coder who always had a strange side-project. His schemes were always hair-brained attempts at making money, but they were always pretty impressive as far as the technical abilities they betrayed. The week that Bitshares popped and rose from a tawdry market cap of around $16 million to its height of $90 million (August 15, 2014-August 26, 2014), all the believers went out and did the same thing that the Bitcoiners did at the end of 2013.

The next week, when James showed up at the next meeting, he had a new shirt on, new pants, and new shoes. He hadn’t overdone it like the 16 year olds. He was a family man after all, more risk averse. But he was given to the same proclivities to spend his gains as his 16 year old counterparts, just a bit more tempered. “I’m moving to North Carolina,” he told us. He had been hired by Bitshares to work full time on their code and he wanted to be nearer Larimer and the team. He was to be paid in BitUSD - Larimer’s attempt at a simulated federal reserve that, through a decentralized market, would peg the value of the coin to the USD. The project was soon to launch. And, while ridiculous, was one of the first attempts at what has come to be known as a “Stable coin.” It was on a different blockchain than Bitshares, which by this time had become a bit of a blockchain fart factory, and was the kind of idea a child might have.

Needless to say, James packed his bags and left for the hills of North Carolina with his kid and his wife. I don’t know what happened to him. I hope he’s doing well. But somehow, as he was a believer, holding on to his coins for dear life, no matter what the evidence would have otherwise suggested, I imagine he has ridden Bitshares from its peak valuation of nearly $90 million, all the way back down to its current value, hovering somewhere around the still surprising market cap of $12 million. At the very least, it’s back to where it was when James couldn’t afford the nice new shirt, shoes, and pants. But with it, I imagine, James probably purchased a lot of Bitshares all the way down. Somehow, while I hope he’s doing okay, I imagine that life for James is significantly harder now than it was when he was earning money from his blockchain programming.

Larimer Exits His Ponzi and Turns it Over to the Community

Nearly one year ago, Larimer announced on Let’s Talk Bitcoin, that he was abandoning the Bitshares project, and turning over the blockchain to the community. His team was moving on to an even newer project, a sort of Bitshares 2.0. Now, not so long after the initial launch of the Bitshares blockchain, it seemed that Larimer believed the original project was the new model-T of crypto. The move was unprecedented. Consider if you will, the fact that the investment in Bitshares was largely an investment in the team that created Bitshares. Larimer was who people were betting on. And for those that rode the rise in price, Larimer is still lauded as a man who can truly return value, though everyone will acknowledge that attempting to make money on the rise was a bit like trying to catch a falling knife. In his interview, as Levine points out, “this is the 3rd or 4th reinvention of the project.” Though Levine lacks the ability to understand the obvious fact of the matter: Bitshares was the first mass exit of what is probably a legal Ponzi scheme built on the back of information asymmetry.

Larimer’s team released a feature list that they said made their blockchain different from Bitcoin. And sure enough, the feature list was and is very impressive. Those who look at it will certainly acknowledge that Bitshares, on paper, is the Ferrari to Bitcoin’s Model-T. But the difference is that while Bitcoin was created in a world of 0 blockchain alternatives, Bitshares was created in a world of at least 1 alternative. The only way to purchase Bitshares and its subsequent experimental tokens like BitUSD, was to first go through Bitcoin. So it stands, that even those who wanted to purchase Bitshares, like the girls of backpage, they needed Bitcoin. Though unlike Bitcoin, no one needed Bitshares. Moreover, despite having an impressive feature list, Bitshares had plenty of other problems going for it such as its reliance on a nonsense non-work based consensus mechanism - which was its biggest feature. But like my admission that I had been taken for a ride by a proof of bandwidth based consensus, for the lot of us who were new to blockchains, how could we possibly have wrapped our minds around the claims back then? Dunning-Kruger is a disease of the human mind.

The astounding thing about these non-Bitcoin blockchains was the temerity of the believers to accept all claims without question. While Bitcoin’s solution to the Byzantine General problem was its reliance on simple, elegant Proof of Work, a young, barely 20 year old man, came along and claimed that he had also solved the problem using no work - perhaps the hardest problem ever solved in computer science. Throw in “consensus mechanism” and it was enough to draw in anyone who loved Bitcoin but who also had in their ideological framework an important place for environmentalism. Those with such a complex agree (even to this day) that Bitcoin’s proof of work is wasteful, and that we should, at all costs seek out alternatives. But the claim is to utterly misunderstand the process of proof of work. And as proof of stake (as the Larimer alternative has come to be known) has gained a foothold in the architecture of every subsequent blockchain, the criticisms of the most competent people in the room have been realized time and again: namely, all consensus mechanisms revert to work and as such, POS is nothing more than the process of obfuscating the process of that reversion. And thusly, with each new iteration, the proponents of proof of stake demonstrate the farthest reaches of the Peter Principle wherein a person obfuscates to their degree of comprehension. When there, they cease to be able to see the problems and all things are suddenly reducible (more on this later).

The Anatomy of Blockchain as Ponzi

The Ponzi scheme represents a belief in perpetual motion. People will invest in obvious Ponzis because they believe that this time, it’s different. This time, the Ponzi will go ever up and never down. But as the World Bank said, “The catch lies in the fact that there is no stopping point. Since old investors get paid with the deposits made by the new investors, you need an ever-growing pool of investors. This cannot happen endlessly in our finite world. So the tragedy of the Ponzi is that it has to crash.” Alas, the deeply seated belief of the investor in pyramid schemes of these sorts is that the inflows will never end. It is the perpetual motion machine of finance. Likewise, the belief that blockchains can work without power, which was what Larimer set out to do, is a claim equally as absurd as saying a Ponzi will continue to grow forever. It is a mechanical engineering claim that the world’s biggest problems are reducible to systems with no opportunity cost. And so it goes, the mentality of Ponzi investors and the mentality of blockchainists are the same, just in different realms.

Consider that the entire history of Bitshares was controlled by a single person. Larimer had all the information about when features would be released, announced, and, more importantly, when he was going to announce his exit from the project. He was in full control of when the inflows of money would suddenly be made less attractive. The dirty secret is that no one ever used Bitshares. Almost all of its funds were kept near at hand, where individuals could sell in exchanges. No one ever knew whether the features promised by Larimer ever worked. As such, the entirety of the value was based on the speculative interest in the feature set and Larimer’s ability to develop that feature set. For those that were competent enough to actually use Bitshares, they will tell you that the blockchain and its software have never really worked at all. None of what was promised was delivered. But it didn’t matter anyway, since no one ever needed the Bitshares blockchain. And so, filled with regret, Larimer was able to do whatever he wanted with his funds before making announcements about the project. While I have no evidence he did it, I can only assume that he and his team regularly bought before feature announcements were made, and sold before events like Larimer announcing his exit. The small team of developers were completely in control of the speculative inflows and completely aware of when those inflows would stop. And when they stopped, the team walked away from the project. And as the project slowly collapses on the believers, the team will be able to say very simply that when they left the project, everything was a-okay. And the guidance of the community that took over its development is how their blockchain lost its way.

This is the nature of blockchains. Insofar as we can agree that they are (somewhat) organic structures, built on the backs of faithful participants who host them on their computers, before a blockchain develops a circular economy it looks very much like the World Bank’s description of a natural Ponzi. And insofar as this organic structure can be conjured up in the same way a seed can be planted by a person and gives rise to a tree, a team or an individual can direct the growth and subsequent downfall of the blockchain Ponzi with little to no legal ramifications. Larimer did it with Bitshares. He’s doing it again with an even more sophisticated version of it now in his promotion of Steemit, a blockchain that solves all the problems Bitshares was plagued with - at least that’s his claim. The feature-list of Steemit, hilariously, is its Ponzi-like illiquidity mechanism which prevents users from exiting their position by locking up their funds with a promise of big returns. But this time, it’s different. This time, they will tell you, the inflows will never stop. Right?

Enter the Bankers....

(To Be Continued)