Sam Bankman-Fried and FTX collapse

Post Reply New Topic

Just because I don't see anything here about it:

https://www.vox.com/the-goods/23451761/ ... in-alameda

A central piece of this - FTX / Alameda were eating their own cooking in the way of the FTT token.

Watching this now, no promises on quality.

I initially posted an article because people generally don't want to watch Youtube videos.

All the same, Lyn Alden and The Distributist:

Apparently Genesis now needs a one billion dollar bailout by Monday (praying to saint CZ perhaps) based on FTX contagion:

https://www.reuters.com/technology/cryp ... 022-11-18/

An additional concern is that the parent company who owns Genesis, Digital Currency Group, also owns Grayscale and there's concern that their bitcoin coffers might flood the market and cause another dip level if they don't get the required loan.

Glad I only ever burned about $1100 in crypto. I say burned because I just assume it's worthless now as I never looked at it again after the first few months like 5 or so years ago and it's likely gone to zero.

But overall that's a small sum compared to what others pumped into crypto and lost.. like e v e r y t h i n g they had.

I always thought crypto was a “money for nothing” scheme, as it has no tangible component. Sure, you were paying for numbers from a computer system, much like a lotto ticket. People became “rich” on paper with little real means to the value. But, it was reversed with time. Nothing for their money is what many ended up with. (Enron part II)

I do find this funny, ie. the possibility that SBF and Glenn Ellison's furry / wood nymph daughter Caroline were patsies, ie. that they gave this over to 'dumb kids' with the idea that it would crumble, damage the crypto industry, and they'd be able to stack the regulations on their terms. A bit conspiratorial but when there's billions or even trillions on the line the motivation ratchets to heights where it gets a bit more plausible.

Do I believe it? Not necessarily without evidence but it'll be interesting to see if the Glenn Ellison / Gary Gensler relationship gets to be specifically relevant to to the case:

Despite a rather stupid click-baity title Kevin says some interesting things, perhaps most importantly that due to failure in the US to get legislation for crypto most institutions who still want anything to do with crypto are sending their money to Canadian markets as the regulation up there is far and away better.

No matter how many times I read the various explanations, I still couldn't understand the underlying value of crypto. I guess that's because there isn't any (or at least not much).

To bring the dirty / unpopular info - it does a handful of things:

1) provides public accounting ledger for all transactions.

2) eliminates middlemen such as the banking system (your assets are self-custodied in online wallets, although smarter if you have a hardware wallet like a Ledger, Trezor, or something like that).

3) 'Smart contracts' (such as what Etherium, Cardano, and other smart chains offer) act like an automated escrow.

4) Going forward - pretty much anything you can imagine using a block chain ledger for and coins as a user and internal governance incentive program.

There's a lot of inefficiency that would go away if these do obviate large swaths of the banking sector, and if smart contracts and oracles continue to improve it could also replace large swaths of the insurance sector.

I do think it has a really bright future but it's headed toward at least investment doldrums for a while until it's properly regulated.

The interesting thing about FTX - it's not a case of proving that crypto's a ponzi, it's more an illustration that unregulated exchanges can do what they want and explode - much in the same way that the 1999 repeal of Glass-Steagall helped give us Enron, Arthur Anderson, in 2001 as well as the calamity of 2008.

I'm still not clear on exactly what value is produced.

Like a stock is pretty abstract, but it's linked to the company's performance. So you buy a share, and the company uses that to create some good or service. Likewise, with a bond, you pay in and the company/city/country produces something with it and (hopefully) pays you back.

Investing in precious metals may or may not be wise (I'm not qualified to say), but at least those metals have some intrinsic value.

But I don't understand what the value is for crypto. I'm not trying to be sarcastic here, BTW (and I apologize if I'm coming across that way), but I genuinely don't get it.

I've viewed it as nothing but a speculative investment vehicle & potential pyramid scheme.

Warren Buffett warned a couple years or so back that it all sounded like BS and wouldn't end well.

But crypto fans are like "But we use it to buy stuff just like any other currency!!" and I was like "Wtf? People can spend crypto ? No one accepts crypto for payments anywhere.. so how ?" and apparently it's a way bigger thing in the USA than Canada that people can get crypto debit cards and buy their gas an groceries in multiple crypto currencies. Apparently it's technically possible to do in Canada, too, but I think I might know ONE person that's got a card they can use and I know of ONE other that somehow mines crypto then trade it for amazon gift cards then buy all their things online.

But overall, the only use crypto has had for Canadians is as a speculative investment to gamble on and as a pyramid scheme for early buyers to get in on the ground floor of a coin and then make money off of subsequent suckers. Something like that. Which is way I never paid much attention to it nor put much money into it - it just doesn't make any real sense, at least not in any of it's current iterations.. especially since I can spend cash, credit, debit in Canadian dollars without having to spend a $45 transaction fee or whatever nonsense BS bitcoin charges during peak demand.


crypto has a lot of s**t to sort out if it's going to be taken seriously. In the meantime it still might make some people some gambling returns if they know enough about it and get lucky buying something low and selling it high.

So in this context it's a lot like investing in a software company, an app producer, or a platform of some type (eg. Facebook, Twitter, etc.), just that instead of selling stock they're selling a governance or incentives token and the token is considered to be a share of ownership of the network itself.

The technology and value created is going to increasingly look like that as well the more gaming platforms (such as GALA for instance) are out there or the more distributed social media, music, and other entertainment platforms are on the block chain.

What I still admittedly don't fully understand, although it seems to be clear for the more pro-regulatory exchanges like Coinbase to filter out which coins they will or won't buy/sell, is how it is that any of these pass what's referred to as the 'Howey Test'. Apparently Brian Armstrong (CEO of Coinbase) and his team are comfortable enough to list several hundred coins on their exchange which they reviewed and came to the conclusion that it was highly unlikely that these coins would be deemed unregistered digital securities by the SEC.

A brief explanation of the Howey Test as it pertains to crypto:
https://www.investopedia.com/terms/h/howey-test.asp

IMHO that's the biggest rational fear to have right now - that Gary Ginsler or whoever may take his place declares that everything other than Bitcoin is an unregistered digital security. It seems like what separates most cryptos (other than Bitcoin) from being digital securities is their decentralization and whatever plausible arguments that ownership confers more primary benefits than investment income.

On one hand there are a lot of good products, like Chainlink's oracle services, VeChain's offering of supply chain verification for products purchased, it's just that the more of a useful product that these foundations and/or companies make the more likely they are perhaps to be declared digital securities unless there's a lot of decentralization and strong arguments as to how their coins aren't simply digital stock by another name.

A lot of Bitcoin purists would argue that this is why you'd only want to invest in Bitcoin, ie. it's the only 'genuine article' and it's precisely it's lack of a public company or originating team is why it wouldn't be considered a digital security.

IMHO national / international governance isn't likely to blot out everything on first principles even if they do agree with this logic, ie. they don't want to chase the innovation offshore (they're shooting their economies in the foot if they do) so I'm expecting that a few things will come of this:

1) Much more strict regulation of crypto exchanges.
2) Some type of amnesty for even those token they consider digital securities.

But what does this network produce?

Considering what you just quoted I'm stumped.

They make play-to-earn gaming apps? They make social media networks? They make distributed finance apps and exchanges? Automated escrow with no escrow agents? Some have commercial applications for creating a digital trail for goods such as Vechain that Louis Vuitton built? Others like Orchid are VPN providers, Helium does 5G.

What's novel or different here isn't most of the products themselves but rather how they connect and what kind of ductwork / rails that their built on - which is the blockchain ledger and the governance principles involved.

If the above still didn't answer your question you'll either have to be more specific on what you're asking or we'll have to hope someone else can explain it in a way that clicks.