I recently wrote a post where I answered the question Is Kelsey Coin a Scam?
I would recomend reading the post to get some context but the short version is that:
- Kelsey coin is not a cryptocurrency, the way it works is you send Kelsey money and he will credit you with Kelsey Coin on his website.
- You can send kelsey coin to other people's email addresses. Kelsey claims that Kelsey Coin will always be worth $1 because you pay him $1 for each Kelsey coin.
- He is also building a website (that seems to be offline now...) where you can buy and sell things with Kelsey Coin.
My conclusion was that Kelsey coin is probably not a scam but it is a terrible idea that won't work for many reasons.
Well a few days ago I recieved a response from Chris Kelsey, the creator of Kelsey Coin. I thought it would be interesting for you all to see our exchange so far. Here is his response:
At the end of the day there is speculation, and there is reality. At this current stage of Kelsey Coin it is very easy to dismiss it as a scam (especially considering that every cryptocurrency is fraudulent in one way another, note: Kelsey Coin is not a cryptocurrency). It’s obvious that I benefit from every dollar bought with Kelsey Coin. The reason the price won’t change from $1 is that yes, you could have a friend send you 1 Kelsey Coin for 50 cents instead of a dollar. The difference is that you will only be able to do so on the off chance someone wants to get rid of their Kelsey Con and sell it at a discount. The amount of users doing this will be so minuscule that I don’t really care. The reason I believe this model will become massively successful is because even if an alternate marketplace appears that lets people sell Kelsey coin for less than what they bought it for, they’d just be losing money un-necessarily (this would usually happen during a desperate time for an individual where they for whatever reason need normal cash instead of Kelsey Coin). I also agree with the trust factor being relevant, that is just something you will have to find out over time.
This was my response:
“Every cryptocurrency is fraudulent in one way or another”
No, there are many legitimate cryptocurrencies out there that do exactly what they say they are doing. Though to be fair there are a lot of scams or just poor ideas in that space.
“The difference is that you will only be able to do so on the off chance someone wants to get rid of their Kelsey Con and sell it at a discount. The amount of users doing this will be so minuscule that I don’t really care.”
How do you know that the amount of users doing this would be minuscule. I’m not sure if you’re familiar with any of the other projects that try to peg their coin to a dollar (Tether, Steem Backed Dollars, Dai, Basis, Bit-usd, true USD, etc) but they all have various mechanisms to try and control the price to keep it at a dollar. Some work better than others (I think basis is probably the best one) but none of them can keep it at $1 all the time. The closest one to what you are trying to do is Tether. They have a bank account (supposedly) where you can send them dollars and they will send you tether (sound familiar) but you can also send them tether and they will give you back the equal amount of dollars. Even though they are literaly just trading back and forth for the same dollar amount, they still cannot keep the price steady at $1 all the time. If people don’t trust them, they sell and the price drops. If lots of people get excited about it, they buy and the price goes up.
Let’s compare that to Kelsey Coin. You are going to sell them for $1 to me. But what if I want to sell them back to you? Can I? As far as I could tell I could not. So my only choice is to try and sell them to someone else on the open market. If no one else is interested at buying them at full price then I will have to lower the amount I’m going to get until I can sell them.
This causes a vicious cycle known as a “deflationary cycle”. If people don’t believe in the project, the price will go down, which causes more people to disbelieve in the project, which causes the price to go down further. There is no way to prop the price up to instill confidence in the market. (I hope that all made sense)
If we have to trust you to make it work, it probably won’t work. You have to prove your trust first, and even then you can never convince everyone and you will get caught in the vicious cycle at some point and if there is no mechanism for keeping saving the price once the vicious cycle happens then you will have a crash.
I don’t understand the value proposition. What would make me want to use kelsey coin vs a cryptocurrency. The point of cryptocurrencies is that they eliminate the need to trust a third party. So now I don’t need to trust you I can just trust the open source code of my cryptocurrency of choice.
Sorry, I’m not trying to be rude, just calling it how I see it.
After writing this response I went and watched some of Kelsey's videos and read some of his other posts. At this point I'm pretty sure that his intentions are not totally deceptive. I think he really believes this is a really good idea that will make him money. I think that he simply doesn't understand economics.
Well what do you think? Did my response make sense? Am I missing something? Let me know in the comments.
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