philip lelyveld The world of entertainment technology

Pumpers, Dumpers, and Shills: The Skycoin Saga

Michael Terpin, who has managed two hundred such token sales, and who handled public relations for Skycoin, told me that the scheme empowers entrepreneurs. “Somebody who had an innovative product could sell directly, prior to it being built, to an audience of enthusiasts,” he said, without having to “give up a third of the company.”

A frenzy followed a few years later. Since 2017, hundreds of projects have announced token sales. One of the most lucrative, eos, raised about three and a half billion dollars in a yearlong I.C.O. 

 In chat rooms, Smietana’s followers addressed him with reverence. “We all are in honor to speak with synth,” a user called Anosis wrote. “It’s like having a chance to talk to Satoshi.”

By early January, 2018, the total estimated value of pre-mined Skycoins had reached almost five billion dollars. Smietana sent representatives to conferences in New York, Lisbon, San Francisco, and Singapore, and arranged a retreat in Mauritius. A former marketing contractor, who requested anonymity out of fear of harassment, recalled that Smietana could spend lavishly on the people who worked with Skycoin, in one case paying for cryotherapy, vitamin injections, thousand-dollar steak dinners, and a twelve-thousand-dollar trip to the Esalen Institute. 

In early February, 2018, a month after the CoinAgenda conference, Stephens booked a trip to Shanghai to see Smietana, determined to bring some order to Skycoin. One night, he had dinner with Smietana and members of a Chinese marketing team that Smietana had hired, at a steak house in Xuhui. As the dinner began, Smietana rose from his chair and launched into a rambling diatribe of conspiracy theories. For hours, he catalogued the hidden crimes of a class of global élites who controlled citizens through virtual reality, medical marijuana, and pornography. At some point, Stephens started recording Smietana on his phone. “We want to feminize the peasant population to make them more docile,” Smietana says. “It’s so they don’t revolt.”

Skycoin went into full damage-control mode. The project had been running a black-ops marketing unit sometimes referred to as Shill Team Six, composed of users plucked from Telegram who specialized in manipulating attention on the Internet. The “shills” occasionally flooded 4chan and Reddit, keeping engagement up with memes and bots. 

In voice messages, DJ Hives referred to Skycoin customers as “fish,” a poker term for easily exploited players, and encouraged Smietana to cultivate an aura of infallibility: “We want to put you on the level of deity as far as the masses are concerned.” (When contacted on Telegram, DJ Hives said, “None of this is correct,” and declined to comment further.)

In July, 2018, a recording leaked of Li Xiaolai, a Chinese billionaire and the founder of a coin that launched with an eighty-two-million-dollar token sale, giving his unfiltered perspective on the industry. “From the start, I knew one thing,” he said. “The main power to compete here is the traffic.” Successful coins accrue value, in other words, not because of technical sophistication but because they get people’s attention. This requires having a founder who can capture the imagination. “All the successful 100X, 1000X projects—you go and look at the founder, they will definitely be a spin doctor,” he said. What matters with a coin is that people are talking about it. “The consensus of idiots is still consensus,” he said.

To some extent, this is true of most modern currencies: they have no value apart from what we collectively assign them. But the U.S. dollar is supported by government guarantees and controlled through monetary policies. Bitcoin abolished government backing, but its scarcity is regulated through algorithms. (Even so, a tweet or statement from a high-profile coinholder like Elon Musk can raise or crash its price.) ...  Their value is built on a promise that some feature, often still in development, will make them more useful than other currencies. Until that promise is fulfilled, it is largely a matter of faith. “Money is a social construct,” Smietana wrote, on Telegram. “It is based upon CONFIDENCE . . . Confidence is a religion and is built upon perception and not reality.”

Founders that control perception control the price of their coin. According to Chwierut, the blockchain researcher, during the I.C.O. bubble, it was not uncommon for founders to spend as much as thirty per cent of their budget on ad campaigns.

I began to feel dizzy reporting this story, trying to sort through the layers of deception and to figure out whom I could trust. Everyone seemed to think that they could spin what I wrote to their advantage.

See the full long article here: https://www.newyorker.com/tech/annals-of-technology/pumpers-dumpers-and-shills-the-skycoin-saga