FTX Yikes
rekt.news
rekt.news
There’s only so many years of being told “soon you’ll be able to buy pizza with yeetcoin!” before you have to accept that this supposed endgame just ain’t gonna happen.
…ah but if it did, that yeetcoin is going to be worth a hell of a lot! Maybe you should buy one, just in case!
I must resist the demon on my shoulder telling me such things.
- bank runs
- currency debasement
- arbitrary seizures
- changing or rotating those keys (basic infosec)
Currency debasement is the act of lowering the intrinsic value of money, e.g lowering the gold content of a coin.
Since the intrinsic value of a bunch of numbers on a computer is 0, this is technically true, but only cause it can't go any lower.
> - arbitrary seizures
It also prevents non-arbitrary seizures as part of legitimate law enforcement action. Child porn rings, organized crime, etc etc
Sure, you can keep it under your bed and assume all the risk yourself and not earn interest; that was OK while it was an appreciating asset, but that's not something you can rely on.
That's really the whole problem - understanding how all of this stuff works requires a master's degree in cryptocurrency. Being smart enough to vet that it's actually implemented the way its proponents claim is even harder.
You can point at some hypothetical future you imagined from the pure crypto first principles, but then I have to trust you. And so, ultimately all of this comes down to trust. Not "mathematical" trust but rather real, human vetting process that require actual work to be done by humans.
The problem then, becomes that regardless of the foundations of your system, if enough bad actors take advantage of the systems inherently confusing nature, then no one will trust the people who are using it for good. And what point is there in a system that is only used for idealistic side-projects and deception?
And trusting experts who distill and educate us on these things is fine, it’s how math, science, physics works. But we can verify the claims in these fields, instead of blindly trusting a single mathematician. That’s the idea of crypto too: don’t trust, verify. FTX was a case of trusting one entity with no verifiable proof of their actions. Uniswap is the case of trusting the code and protocol, and many people coming to consensus to verify it.
Of course, in reality, you can't get your money from FTX either. But in current shape of crypto, there is certainly a point to having centralised exchanges.
This is why L2 is actively being developed on Ethereum, and already processing a lot of volume. Same trustless withdrawals, but higher bandwidth and lower fees.
https://www.coindesk.com/markets/2020/05/22/10-years-after-l...
The payment flow was easier than using my card (because I didn't have to go find my card, authenticate the purchase in my banks shitty app as per "SCA", etc)
The UX is terrible. Unless you are in a country with poor credit card security like America.
Also, a lot of the better takeout places are moving off deliveroo/etc and just doing their own delivery drivers now.
So it’s certainly possible in countries where strong authentication is the norm.
Also, no need to deal with insane price fluctuations and collapsing exchanges impacting the price of pizza.
The "crypto debit card" is exactly the same thing.
But it's not like the pizza I bought was priced in AAPL shares! It was priced in dollars. The margin loan isn't material to the payment system.
It's the same situation with crypto debit cards. Anything you buy with such a card is priced in USD/EUR/whatever. The crypto behind the scenes makes no difference, just like the AAPL shares in my brokerage account. Hence these crypto-backed cards are not crypto payments in any sense — they're a financial product that already existed.
I have been on the inside for a while, and completely agree that there is zero fundamental value to anything, it is purely, 100% speculation and most of it (especially DeFi) is borderline illegal and useless.
> The settlement is still in fiat currency
Who cares how it's done on the bookkeeping side? I care about my account being lowered by the amount of crypto something has cost me and getting the service / goods I want.
Again, you seeing zero value is your perspective. Many people see zero value in abstract art.
Anybody who understands what cryptocurrency is supposed to be should definitely care about it. There is nothing crypto about these cards, they just liquidate some of your crypto collateral to settle in fiat. You could do this yourself, or use any other random credit card. It's a convenience, but is literally the anti-thesis of cryptocurrency, and/or has nothing to do with cryptocurrency in the first place. The cards are ran by a financial institute or bank and the collateral could be anything.
Sure, the card and its convenience and functionality has value. Cryptocurrency plays zero part in it. Funnily enough, what you see as value here is provided by the fiat system and not by cryptocurrency.
> Cryptocurrency plays zero part in it.
Except backing your payment, it really doesn't.
> It's a convenience
And convenience is value. Not inherently by crypto, but the fact it's possible is an extra benefit.
Would you also object that if I spend EUR for a product online in GBP then the seller is not getting EUR?
I think this is the point I was trying to make as well. Obviously this service has value, but not because of cryptocurrency, which was the matter of discussion
1. btc = king ponzi (not by intent)
2. eth = enabler of all other ponzis
3. every other token is a straight ponzi
The token ponzi telegram culture is overshadowing the real world problems we can solve (such as absolving trust based contracts)
Crypto is extensively used to bypass capital controls imposed by many countries precisely because it's so easy send it to a foreign country and exchange them for a currency other than dollars. Think Lira, South African Rand etc.
There's certainly value in the systems. It's the value of the tokens that's uncertain.
I honestly can't tell if your comment is satire, because there are actually people making this argument and meaning it.
Take these exchanges. Set aside for a second the lack of regulations/protections/security checks that they’d be subject to if they were above board.
Just from a technical perspective: there are N tokens trading on the exchange. For each token, there is 1 logical implementation of that chain and there are P implementations of that logic (also often 1, sometimes more). You have X clients, with their own balances of each token B.
So, even beyond your own code/risk management/security systems, you have (N * P) other blocks of code that you’ve never audited, that would cause you (X * B) liabilities to your customers that you didn’t cause and have no ability to prevent on an ongoing basis.
The more successful your exchange is, the more those risks and liabilities grow - presumably exponentially.
All I get back is vacant stares when I point this out. Or get told “I just don’t get it” or “have fun staying poor”.
Sigh.
Most moonboys or people on the inside are in absolute denial. Don't take it personally. I have an acquaintance who is a "DeFi" investor, you wouldn't believe how much incredibly, utterly stupid "projects" this rather smart intelligent man "invests" in. 95% of DeFi are simply cash grabs, and I have not yet seen ONE project that actually profits off being on a blockchain or would be worse off not being on one. It is absolute insanity and like the Dotcom bubble all over again, and the pop is going to hurt like never before.
The impact of a complete implosion of the entirety of the cryptocurrency economy will not have anything close to that effect.
I suspect the numbers of people invested are every bit as widespread as the media would have you believe. I'd be willing to bet it reaches even further into places you wouldn't expect (e.g. largely opaque pensions and company "cash" balances).
The basic ability to transfer funds instantly has already been working flawlessly since inception. That's a real problem, buying a hotdog with bitcoin, less so.
Dunno, top voted comment didn't take a look before dismissing? Sounds like yc alright.
As a very early and ardent believer in cryptocurrency, and cryptography in general, I'm not sure that I do want this "industry" to succeed. I see it as an imperfect but necessary mechanism to survive inevitable disaster. The "industry" must eventually die, either from obsolescence to the ideas that started it, or the failure of those ideas. I've accepted that it may be necessary, but also an existential risk, as the "industry" will always avoid self-obsolescence, and push toward the latter. This is already obvious from the cryptography perspective. The "industry" will never allow their products to adapt beyond their control.
Bitcoin was an incredible technological achievement. It has interesting implications in the computing, social and economic spaces. It's borne out of the anarchic and cypherpunk ideas. It has no leaders, no visionaries.
Then came the people wanting to profit. The companies. The scammers. The get rich quick con artists. The trading apps. The DeFi venture capitalists. The alt-coins. The far-right libertarians. The banks. The memers. The Twitter bots. The governments.
And here we are. For all I care it can all burn to the ground. The price of Bitcoin ain't that interesting anyway, just like I don't love a programming language only iff it has a lot of users. To me Bitcoin is a bit like Lisp: a ground-breaking white-paper way ahead of its time, which has spawned countless imitation and is often misunderstood.
Bitcoin is the hardest, most secure cryptocurrency. Building on top of it means being cautious and careful, lest you lose tokens of actual worth, as opposed to tokens that have value solely because your own system uses it.
I thought that smart contacts in particular are not possible due to Bitcoin Script's limitations?
He was a billionaire at 25, and a millionaire at 30 :^)
If not, nothing that matters will happen, and he can take some positive encouragement that stablecoin launched stablecoin 2.0 a few days after the first one went to 0 and even the wework founder can raise a billion without a plan.
This might have gotten a bit personal, but effectively this is a lobbyist fight. Whoever wins, we lose. Keep your crypto in self-custody and remember that what the state and those with billions to spend on gaining influence are ultimately corseted by the myopia that comes with power. There are people who use crypto everyday now - I am one of them - and maybe the preoccupation over schoolyard slights and performative regulatory capture will simply result in more and more people moving crypto off the CEXes.
For crypto to exist in the regular world, its always seemed like more regulation of some sort is inevitable. Particularly for a company like FTX with US ties, and it looked like SBF was starting to cosy up to the regulators and fit himself in among the powers that be in the US. His big political donations, sports sponsorships, philanthropic funds. It looked to me like a person who believed in the idealism of crypto was fitting himself into the old world, and all of this lended credence to FTX being trustworthy.
In the end his views on regulation went too far for many and this was strangely the thing that led exposing the dodgy things going on behind the curtain (with the leak of the balance sheet, and CZ saying he would exit his FTT).
That said, Alameda Research, the trading arm, were clearly no slouches, they used to be up there on the Bitmex leaderboard and it seems so hard to grok that they couldn't have modelled all of this risk properly. Accounting for who is holding large amounts of FTT and the price impact that could have.
I sort of feel there must be more to it, or maybe, then again, it just comes down to the same thing that's caused many other crypto funds to blow up - simple greed. The collateral is sitting there, so why use it. What's the worst that can happen?
I think they did, but their management got greedy and overly hopeful that Bitcoin was going to break 100k last year. This is a trend in crypto for quite a while now: companies get big when the price increases, then get overly complacent and greedy when the market turns.
Remember, you can have perfectly simulated risk assessments, only to have your boss say: "but we want to risk it anyway" and just ignore your protests.
> His big political donations, sports sponsorships, philanthropic funds. It looked to me like a person who believed in the idealism of crypto was fitting himself into the old world, and all of this lended credence to FTX being trustworthy.
All of that made FTX seem even less trustworthy to me tbh. Much, much less trustworthy.
Yes there are scams, but that is not exclusive to the cryptocurrency world, and nobody is defending those.
Yes there is too much price speculation, but there are also thousands of developers, companies and DAOs working on useful projects. We want cryptocurrencies and blockchains to be useful to people, let's focus on that.
Yes scalability is insufficient at the moment, but there are multiple blockchains with concrete and plausible roadmaps to improve it while keeping enough decentralization. Let's not focus on the limitations of today, but on the possibilities of the future. Otherwise it would be like failing to imagine Youtube in the era of dial-up modems. It's unbecoming of Hacker News.
I would like people in general, and even more here, to think twice and keep an open mind. If so many people are excited and dedicating their lives to it, isn't it possible that you missed something important?
We are 10 years in, I've followed the whole scene from the outside, not really engaged in it but always keeping tabs on developments, exciting things popping up, etc. I'm thoroughly convinced the current crop of cryptocurrencies/cryptofinance should die.
I dislike the apologisers bringing up that "scams are not exclusively to cryptocurrency", yes, of course, there are scams everywhere but very few technologies live in this crossroads of lack of control and perverse incentives for greedy people to rob others. The amount of money circulating in it freely available to be scammed is also on a level different than most others. The enabling of scams with this technology is absurd.
10 years in and I still haven't really found a use-case that could come close to compensate for the amount of money that naive people have lost, I've seen complete assholes that I personally know become filthy rich, quickly, just by not having any moral compass and being enabled by this technology to steal from others.
No, I won't focus on the possibilities of the future knowing the amount of damage it creates in the present, I don't live with a Machiavellian moral of "the ends justify the means". The current means suck and there is no big push from the cryptocurrency scene to address those properly because it's been co-opted by the scammers through and through.
Does the technology itself still have some exciting features? Yes. Do I believe that it'll eventually evolve to something that is actually useful and not hostile? No, I don't believe that, not the current crop of people working on it.
> If so many people are excited and dedicating their lives to it, isn't it possible that you missed something important?
Isn't it possible that those people have misguided (or mischievous) motivations? It's not because a lot of people fall into a hype that it makes the hype validated. Even less a hype that is completely and absolutely created by pure greed.
It's been 10 years, and nothing useful has been made. Merely things that really promise us could be, one day, perhaps, useful. Sorry bruv, we'll only listen to that argument for so long. And I think it's been long enough.
>We want cryptocurrencies and blockchains to be useful to people, let's focus on that.
No, you have it backwards. We want things useful to people - if that's cryptocurrency and blockchain, then we want them, but if they're NOT then we don't. There's nothing intrinsic about them we want.
This is what happens when you put beliefs above facts. Just because you believe something doesn't make it true. If you ask a bunch of domain experts to review something, and they say it is bogus, then you are the one acting in bad faith, not them.
Don't blame them for giving you the answer you didn't want.
Instead, go be that crazy visionary and prove them all wrong. That's how science works.
For there to be positive coverage, something positive has to happen... like that kid on tik tok who bought a $2mil house and paid for his mortgage with the 20% interest paid on his 200k DeFi stablecoin holding. Now that there was a heartwarming and positive story.
I had tokens stolen from a wallet using a fairly obtuse scheme involving ERC-20 token approval and a proxy contract. This is required for almost all DEX users, and really is a weakness of the EVM in that it restricts user transactions to single contract calls rather than sequences like smart contract internal transactions. There are ugly, insecure, incompatible, and expensive workarounds like smart contract wallets and exploding contract deployments. I guess I should probably raise an EIP to make this sane.
It looks like you need to pick your poison. Trust social structures or trust in code security audits. Of course you can read the code yourself, but unless you're a security researcher that's not going to be very useful.
If I have to choose between holding USD or ETH, I'll pick the US Dollar. But if my choice is between holding and transacting in ETH vs. some third-rate local currency by a semi-corrupt government, I'd be all-in on crypto.
I will use dollar, gold or silver.
Of course the government can ban holding crypto, but that's going to much harder to enforce since it's just bits.
Of course I have no evidence, it's just my anecdotal experience, which doesn't count for much. I actually hope I'm wrong.
While not American, I can fully understand the promises (but not guarantees) of DeFi and cryptocurrencies but, I prefer to invest in popcorn futures, for now.
Because, by sheer luck I know a lot of people who worked in TradFi, and I've seen its insides and how mature it is. It's not perfect, it's not fair in some places, but it's rooted and mature. You can see the direction of it, and be prepared if you watch for the signs.
I'm investing in popcorn futures, not because I believe DeFi will fail, but watching the evangelists think that they can change a centuries old system in a decade flat.
DeFi and TradFi will merge. The end will look like TradFi, but the inner working will be a lot (but not completely) different. Believe or not, but most of the TradFi regulations are there to prevent these kinds of free falls and screw-overs.
I am annoyed by such arguments because crypto has now existed for quite a long time, and the positives are very limited if existent at the moment. Would you mind sharing positive events occurring thanks to crypto?
DeFi continuing to issue user withdrawals regardless of market conditions and the greed of centralized financial custodians? This is the whole reason why Satoshi created Bitcoin and the blockchain in 2008.
(I’m a believer in crypto and decentralisation however)
Your points are absolutely true, but I don't think the person you're replying to was necessarily unaware of them.
So I appreciated both your comments, albeit for completely different reasons.