Lies and deceit in the Blockchain and AI industries
I have been a tech entrepreneur for over 18 years. These years have included building seven startups in different geographies, industries and areas of technology.
Some of the core values I have held high through my entrepreneurship are honesty and humility. Honesty has always been a guiding principle for me, and humility I learned through my struggles in the early years of my career. Believe it or not, being honest and humble has caused me a lot of trouble.
At times, I’ve almost lost my hope for the humanity.
Fake it till you make it! Hustle beats talent!
Are these sayings familiar? There are a lot of people who will happily lie to win. Here are some of the most incredible lies I’ve faced and learned about in blockchain and AI industries during the past year. I also offer some advise on how to detect the liars.
How AI companies lie
Artificial intelligence is the hottest buzzword in the field of technology for a good reason. It is the most disruptive technology in the known history and will be the final invention of the humanity before we become a past tense in the tree of evolution. But the hype has made AI a broadly abused word.
Majority of AI startups have no AI. Let me break you a secret: majority of the self-proclaimed AI startups have not created any artificial intelligence at all. They have simply built or used software and use AI as a way to make their software sound more interesting.
Most chatbots are simple pre-build dialogue trees. Most “AI chatbot” startups use libraries and APIs from large companies create dialogue trees or to match keywords to intents. AI there means that the large company has used machine learning to create those libraries. Vast majority of the chatbot conversations don’t even use that, they simply follow pre-built dialogue trees.
Most “AI for sales” startups have no AI. They make simple email bots that spam categorized lists of email recipients with pre-built templates. There’s zero actual AI involved. What’s worse, these marketing automation tools are specifically built to deceive the recipient to believe that there’s a human who cares about them, when in reality there’s just a bot dropping in drip campaigns.
Pseudo-AI products. Many “AI” products get the job done with human labor, and just pretend that the work is done with AI. The email or calendar meeting that the company pretended AI to have processed was actually processed by a human assistant.
How do I know if an AI startup is lying about their AI?
Generally, any startup that 1) has not raised millions, 2) does not employ team members that have background from machine learning, and 3) does not have a large dataset available for machine learning is probably lying if they claim to be doing artificial intelligence.
How blockchain companies lie
Blockchain is probably the second most hyped buzzword today, after artificial intelligence. The industry has grown rapidly from a small circle of geeks into a global industry with hundreds of billions in market cap.
The unregulated nature of cryptocurrencies running on blockchains have enabled the industry to go global overnight, but has also attracted a significant amount of greedy hustlers who will lie to everyone to get rich quick.
Most ICOs are scams. It is estimated that 81% of all Initial Coin Offerings are scams. Their founders market an ICO with grand promises with no intention of following through. It is no wonder why the market has been shrinking this year as fast as it arose last year. Over 99% of the cryptocurrencies currently listed in Coinmarketcap have no other use than speculative trading.
Exchanges are no better. When it comes to speculative trading, “fake it till you make it” is a daily mantra for many exchanges. According to crypto market researchers, currently over $6 billion in daily crypto-exchange trading is faked.
Token projects fake it too. Many token projects hire market makers to not only provide constant bid-ask spread, but also to provide fake wash trading to create appearance of liquidity, and in some cases even to pump the token initially to create appearance of quality. Both of these activities are illegal in regulated securities markets.
Crypto exchanges charge exorbitant fees. Top crypto exchanges now charge more for listing a token than NYSE or Nasdaq, and often require the tokens to commit a significant amount of tokens as well as market making to list. This has prompted Vitalik Buterin to wish centralized exchanges to “burn in hell as much as possible”.
A large portion of ICO reviews are paid. Have you been reading ICO news and reviews from prominent review sites or watching ICO YouTubers? They are mostly paid, as these sites and channels make their money from reviewing the said ICOs. You can not assume any objectivity from the reviewers. It is all a big, fat lie.
Many token rallies are fake. Telegram and Discord are full of pump&dump groups trying to profit from stupid investors. The group owners purchase a token in advance and use their groups to pump it higher while dropping their allocation at the same time with instant profits. They operate outside regulations and under anonymity, as this would be illegal in regulated markets.
Impostors and scammers proliferate in chat rooms. Almost every unsolicited chat message I have received over Telegram has been from a scammer or impostor. Today, I routinely ignore majority of them, and those who look somewhat legit I require to connect over LinkedIn or video call to prove identity.
The usefulness of most tokens is a lie. The main reason why real world applications of Ethereum tokens have not materialized yet is that Ethereum actually makes it harder and more expensive for you to exchange value than using simple online fiat payments. You will have to store two currencies, Ether and the utility token on a hard-to-use wallet like MyEtherWallet and learn to manage extremely complex security protocols to not lose your funds. The easiest use case for tokens is speculative trading in centralized exchanges.
How do I know if anyone is speaking the truth in blockchain?
You will have to analyze the motives of the people talking to you. Unfortunately, people with conscience are a minority in the blockchain industry. Vitalik Buterin, the founder of Ethereum, has a track record of honesty and good intentions. Many other movers and shakers are in for the money, and will happily lie to gain an edge.
The lies and deceit of the investors
It shouldn’t come as a surprise that people working with money resort to lies to gain an edge.
VCs stealing from their LPs. I’ve seen many early stage VCs invest in a startup, and then “hire” themselves or their close friends as expensive consultants to provide a thicker cash flow to themselves than the management fees would provide.
Token investors soliciting new investors with lies. It is common among ICO investors to hide their massive bonuses and kickbacks and solicit you to their syndicate with “the same amazing terms they got”. Backroom deals proliferate and everyone is looking for the next sucker to dump on.
Institutional investors double-dipping blockchain investments. During this year, it has become increasingly common for blockchain projects to raise funding from institutional investors who take both equity and coins with large bonuses with the intention of 1) reducing the risk of the investment by dropping the coins quickly on general public for short term payback, and 2) then raking in the long term profits from the token business to themselves rather than sharing it with the token community. This is all while the white paper tells a beautiful story of equal opportunity participation.
Money laundering investors. During this year, I have been offered so far at least 4 million euros worth of investments that qualify as obvious money laundering cases. No KYC, sometimes payments offered in cash. I declined them all, but when I looked at the previous ICOs participated by the same folks, I saw many prominent, well known ICOs. People are happy to look the other way when they are receiving a lot of money.
Counterfeit money investors. There’s been multiple reported cases of investors agreeing to purchase a large amount of Bitcoin with cash. After all the arrangements have been made, the seller finds out that the cash is counterfeit.
How do I know if an investor is being honest?
When investors talk to you, they do it primarily to understand if and how they can make money from investing in you. A honest investor usually gets to know you and your business first, builds trust, and then invests. A dishonest investor usually is ready to make a deal quickly, as they don’t care about you or your long term plans, but rather plan to make the money from the scam that will screw you.
Will the good guys win eventually?
This is what many of us hope for. When you look at the current leaders of many of the most powerful countries in the world, there may be a sense of hopelessness. Lies seem to help people get ahead, all the way to the top.
The progress of technology has been the fairest way to democratize access to information and opportunities. We need benevolent tech entrepreneurs who truly care about the future of humanity. People who value honesty more than money. They are our best hope.
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If you liked this story, check out some of my previous stories:
Tokens are the future of social networks
Towards Benevolent Capitalism
The Church of Currency
End of 2017: We are losing control
The Rise of Emotionally Intelligent AI
The Human API
How Humans will merge with Machines
Tokens could give birth to AGI, Artificial General Intelligence
AI offers us a new path to opportunity