He didn't say the item doesn't apply, he said that it is a warning sign. Holding a contest doesn't make a product snake oil, but it certainly correlates to snake oil products.

It's the snobbery, not the meaning.

I've been partial to the crypto community since the early 90s and there appear to be three popular ways to dismiss one's security work without bothering to understand any details -

  1. Quoting an item from the snakeoil markers list

       This is the most popular method. It has a good 
       mass appeal as it clearly implies that your 
       opponent is a complete idiot and puts him in a 
       position of needing to prove the opposite.

  2. Gutmann Sound Wave Therapy quote

       Whenever someone thinks that they can replace 
       SSL/SSH with something much better that they 
       designed this morning over coffee, their computer 
       speakers should generate some sort of penis-shaped 
       sound wave and plunge it repeatedly into their 
       skulls until they achieve enlightenment.

       This is as great, arrogant, includes a "penis" 
       and generally makes first-time impression. It
       can't be used too often unfortunately.

  3. Invoking Kerckhoffs's principle and alike

       This is a sophisticated way. Don't really need 
       to understand what the term is or if it applies 
       in a given case. The idea is to just dazzle the 
       opponent with obscure terminology to show they 
       don't know a shit about cryptography.

You've gotta try and be on a receiving end of these. An incredibly welcoming opening of a dialog between the peers. Thickens your skin like nothing else.

I'm interested in some cryptosystems that have been on the receiving end of any of these critiques that were ultimately shown to be sound and useful.

I'm not asking because I think I know the answer. I don't. I don't follow crypto the way you follow crypto; I am interested in it exclusively to the extent that it allows me to break software. You seem to follow the community as a whole, which is not an interest I share. So you probably have some insight into it that I lack.

You didn't read the post I linked to, just the headlines. You seem to be familiar with the article. Maybe reread it. I think you missed the part of it I was calling out.

I read it in full on more than one occasion, thank you very much. Perhaps you should re-read Schneier's original note on cracking contests and figure out how it relates to Mega's case - http://www.schneier.com/crypto-gram-9812.html#1 - because it really doesn't.

Mega's bounty is of the exact same nature as Google's bounty for Chrome bugs. At least it looks that way on the surface. Whether it's genuine bounty is another question, but as I said in another comment I have a problem with the half-assed nature of your original comment rather than with its content. Especially considering that a lot of people on HN look up to you as being the security guy and adopt whatever you say for their own opinion.

---

(edit) The bottom line is that offering a bounty to audit the security of highly public project (after readily admitting several design flaws in the initial version) is not a sign of a snake oil crypto. It's just not.