FTX faces potential hack, sees mysterious outflows totaling more than $600M
coindesk.com
coindesk.com
We're not seeing any else, e.g. laundering through another exchange, splitting into different accounts, automating the liquidation of tokens to ETH, off loading ETH into a cold wallet etc.
The on chain activity makes this look like an individual who did not prepare extensively before doing this or doesn't have the skills to use automation/operational best practices
EDIT: first outflows from 0x59abf3837fa962d6853b4cc0a19513aa031fd32b have started, they still haven't liquidated all their PAXG, a stable coin pegged to gold, unclear if it's freezable.
They were able to liquidate all of their USDT except 4M on avalanche, and all of their usdc both of which can be frozen. Dai is a usd pegged stable coin that can't be frozen, they have nearly 1% of it. Note that Dai is heavily exposed to USDC so authorities could pressure USDC to destroy Dai
How common is the knowledge of these best practices?
This looks like someone who barely understands crypto because all of the transfers can be traced, and since they're apparently working manually and slowly, the audit-surface is huge.
If you think about it, even his name seems to be a troll.
Another option is honestly an insider who got screwed (a lot of employees had a TONNE of money on FTX) selling the keys they knew of to someone else.
Nobody will ever not be suspicious of SBF and his inner circle again after this hack.
If it were just a big collapse and it went like an ordinary bankruptcy with the creditors getting a haircut, he'd just be considered an idiot. Money mysteriously vanished? Now he's malicious as well, and any court is going to ask SBF where it went, and even if he didn't know nobody would believe it.
2) trust me when I say, no one in crypto except some very very select exchanges actually know how to make a market trading software. They think they can compete with NYSE which is large and employs such incredible talent that it still survives in a really tough industry. They’re likely closer to my grad school project, which even I can tell you, sucked absolute balls.
You're also making an assumption emcumbants are where they are because of their current merits and not the mere fact they're standing where someone stood before them.
I haven't seen any public information that tells us who it might be, this is all guess work, but it really doesn't look like a professional operation like Lazarus Group
2. Even if you ARE a skilled insider, you may have no experience with laundering coin.
3. The biggest/best coin launderer was killed (tornado?) recently, so you may have to learn everything again.
4. You may be an expert with a gun to your head in some basement in God knows where, and trying to not be shot.
It’s unclear if that’s a legit source though.
Mostly posting it for later, in case it turns out to be true.
There was also a tweet trying to pin it on a specific coworker.
Even if Circle did freeze some of DAI's USDC, the Dai contract does not contain the ability to freeze user funds, and I believe is also not upgradeable
For sake of lucidity, I want to say that this doesn't necessarily make DeFi integral to these hacks, but it does make the process of liquidating from these hacks easier.
Yes sorry I didn't articulate that very well in my post. This is what in fact I was asking - why it was significant in the "process of liquidating from these hacks."
Could you explain what you mean by "they don't "give up the ownerships of their crypto"? This sounds like an important point but I'm unsure what you mean. Do they anonymize the transaction or something else?
The first address used is 0x0d043128146654c7683fbf30ac98d7b2285ded00
It's a bit harder to trace using public tools because they immediately start splitting off the various coins to other addresses, but looking at just the USDC:
They split it off into a single purpose address that is just responsible for converting it to ETH. They do this via private transactions utilizing uniswap v3 and a set amount just about every minute (they settled on ~2M). If you scan through them their slippage is very good here. If you wait a bit of time you let the arbitrage bots move funds from wherever is available so your slippage isn't so bad.
account responsible for USDC conversion: https://debank.com/profile/0x58f4baccb411acef70a5f6dd174af78...
This account was also responsible for a number of liquidations: https://debank.com/profile/0x9e91ae672e7f7330fc6b9bab9c259bd...
They again show good slippage and also show that they use 3 different exchanges
After they've converted everything to ETH with good slippage they then fan out to multiple accounts that then do a series of deposits into tornado cash at 100 ETH each.
They were done with the liquidation within 2 hours. This attacker is still liquidating as far as I can tell
Say I want to sell 100 pokemons as fast as possible. I will take whatever the market wants to pay me. This is a market order.
Before my order goes in, people are willing to buy 10 pokemons at $50 and willing to sell 10 at $52. The midpoint is 51.
I put in my order.
10 of my pokemons get sold at $50. My slippage is $1x10.
The next level down is $48 where people are willing to buy 25 pokemons. So I will get filled now at $48. My slippage is $3x25=($51-48)x25.
Etc
https://etherscan.io/address/0x59abf3837fa962d6853b4cc0a1951...
[Edit: and also the Heist label is very useful!]
Of course one would assume he or his conspirators would do a better job, but maybe not if this busting out was initiated under time pressure.
Once again almost everything in cryptocurrency proves to be a scam.
This is like saying "once again almost everything in US dollars proves to be a scam" after Lehman fell.
The sentence makes no sense at all to me.
Once again people on HN hate on cryptocurrencies for no good reason.
This isn't a cryptocurrency problem, it's a fractional reserve banking problem. These centralized exchanges are unregulated banks in disguise. It's no surprise to anyone that they exhibit all of the problems of unregulated banks. Problems such as "we used customer deposits to gamble, lost everything and are now insolvent".
To think one of the reasons cryptocurrency was invented was to end the need for such things...
Traditional bankers have spent an incredible amount of time and taken huge political risks to gain hold over the US money supply. They and people in the wall street sphere have a very good reason to hate on crypto, they just dont have any convincing arguments for people like us who dont want them controlling the money supply.
Somehow Satoshi and Andreessen managed to not start a ponzi scheme and this guy did.
Still waiting for your argument on why the big 7 wall street banks should be involved in the money supply instead of democratically elected leaders, which was my primary point.
Are you replying to the right post? I don't see any mention of that
That could only work before 1997.[1]
[1] https://www.congress.gov/treaty-document/105th-congress/18/d...
There would have to be enough of them doing this to prevent the transactions from getting through, which is far from guaranteed, but this is of the sort of scale that it could gain the required support.
The ETH will probably eventually be laundered and some of the cleaned coins sent places they could eventually be traded for XMR and eventually cashed out, but there's no way to do that quickly, and this needs to be done quickly.
I wonder if we will reach a point where "crypto" will revert to not meaning "cryptocurrency" though.
Blockchain based cryptocurrency isn't going anywhere anytime soon. This will remind people to take self custody of their crypto and not leave it on an exchange.
If anything, Crypto is easier to track and stop the looting, compared to if someone left a key to a warehouse containing a billion dollars in cash in it with no security cameras, which is what FTX seems to have managed to do.
From my observation, the overwhelming majority of failures, collapses, and hacks have had a fairly limited exposure to the Ethereum-style/Solidity-based networks. This even includes the exchange collapses like FTX.
By and large Monero, Litecoin, Bitcoin, Algorand, Cardano, and the other networks that are reasonably isolated from the ETH/Solidity space have been largely unaffected by the majority of the "cataclysm" that the space has seen over the last year or two. I don't see any of these projects closing up shop in the near future and I don't see their communities giving up on them either (maybe with the exception of Bitcoin's refusal to move away from PoW or to introduce more programmability).
Odds are the cryptocurrency space is going to recede for at least a few years once the ash settles but IMHO there are too many projects that have yet to suffer serious thefts (as in actual loss not numbers go up/down) in their communities. Likewise these projects tend to also be the ones with shops that are holding sufficient operating funds in stable assets (i.e. US dollar equivalents & bonds) to continue development for the next 5+ years.
TLDR: The failures, hacks, collapses, etc have had limited effect on a lot of projects outside of the popular/flashy part of the the cryptocurrency space. Those projects still have a more or less assured lease on life for the next half a decade.
This may be an understatement of their skill level. It seems the individual(s) also used a Kraken account to transfer funds and have been identified per their CSO.
https://twitter.com/c7five/status/1591434844760076290?s=61&t...
From FTX's general counsel[1], retweeted by FTX_Official. So that indicates it's not being sold off legitimately under some sort of liquidation proceedings. It could be insiders or it could be hackers.
[1] https://twitter.com/_Ryne_Miller/status/1591281729125613570
Rumors on Twitter[2] are there was also an update just pushed to the FTX app. Concerns are the update may contain malware. It makes sense to uninstall the FTX app if you have it.
Is that based on some evidence, or is it speculation?
What a dumpster fire. But let's be honest, I think retail investors weren't getting anything back anyways. Probably only impacts creditors
Now the whole point of crypto was the tech behind it which was supposed to replace banks, exchanges and missuse of your OWN money. It's supposed to be an alternative to the trash financial tools we already use. The fact that people are using entities such FTX, Binance makes them deserve to be punished for their betrayal. Regardless if they use FTX or JP Morgan they pretty much deserve to experiment the shortfalls of centralised finance. I think it's part of the hello world example of what DeFi is trying to solve.
One more thing: If FTX was hacked I bet it has almost nothing to do with the crypto technology.
“Nothing to do with the crypto technology” is an empty and meaningless statement.
IF, and that’s a very big if, they got hacked, the fact that $600m could be moved and disappeared so quickly is 100% to do with the “crypto technology”. In the real financial system it is exponentially harder to make money disappear, transfers are logged on three sides of the transaction, you have to hack multiple autonomous and different tech stacks, and you have to wait as the transfers get transmitted, validated and passed in.
A great deal larger than nothing.
Another comment already noted that MF Global was not a (commercial/retail) bank. One part of it was a broker-dealer.
Also, in the United States customers of MF Global brokerage were covered by the Securities Investor Protection Corporation (SIPC) which (to quote Wiki): <<can pay the customer (via its trustee) up to $500,000 for missing equity, including up to $250,000 for missing cash>>. Please read more here: https://en.wikipedia.org/wiki/Securities_Investor_Protection...
Even with all of the bad behaviour during MF Global's last days (to quote Wiki again): <<In January 2013, a judge approved a settlement that would return 93 percent of customers' investments, with the prospect of additional payouts from the company's general estate.>>
Impressive, considering the extent of fraud at MF Global! Can any collapsed crypto exchange claim the same recovery rate? I doubt it.
Almost everyone who has lost their shirt in financial derivatives in the past 50 years could have learned about the risks they were taking from some text in a prospectus somewhere, but chose not to.
For example, people who lost a lot of money holding XIV (a leveraged inverse-VIX ETN) had the warning about not holding the thing overnight in bold red text in the prospectus. People holding leveraged CDOs and every kind of CDS had all kinds of warnings in big bold text in their prospectus. The good old "liar's loans" of the early 2000's had big bold text saying "it will be bad for you if you lie about your income."
Pretty much the only financial products that don't come with big bold text saying "you are an idiot for buying this" are single stocks and the most boring of ETFs/mutual funds (eg SPY).
Contrast that with the warning signs from crypto projects, which are a lot more oblique than big bold text in a document that they tell you to read. Wall Street screws you, but they generally do it slowly and they tell you how. Crypto projects just straight up steal your money one day out of the blue and run to Dubai.
The rating agencies did not understand the products they were rating. However, the warnings were almost certainly on the label.
That's why the rating agencies were sued over this, and not the banks.
They did sue the banks. For many things including inflated appraisals of the loans.
I'm sure they have some kind of warning for everything that isn't FDIC insured. But misrepresenting high risk as low risk instead of zero risk is just a quantitative difference. There are plenty of scams that do this. for example just lying about a company's earnings. I suppose the precise crimes they charge them for may differ a bit.
Does anyone actually remember MtGox? It wasn't actually that long ago!
If - hypothetically - someone else wanted to take a similar path, the odds of jail time are actually pretty low.
I think there are two ways to think about this:
1. If you’re a company and you have N classes of debt then probably ‘ordinary people’ will all be in the same class (this can vary, eg if you’re a big retail store then wages owed will likely be a different more senior class of debt than anything you owe customers). So the more senior claims are more likely to be big companies as are the more junior claims, and it is unlikely that the ‘ordinary people’ class of debt will be the most senior. For FTX I expect the hedge funds and retail customers to have the same seniority.
2. Hedge funds, etc, will be able to retain lawyers and seek representation in the bankruptcy process in a way that is unaffordable to ordinary people. So they might end up with favourable timelines/restructurings or better accounting of what they’re owed but those arrangements can’t be that the big members of the class get a higher proportion of their money back than the smaller members.
And a lot of bankrupt companies owe the government a lot of money in due taxes...
It's really unfortunate to get "hacked" with such bad timing. You steal customer money and file for bankruptcy but now the bad hackers, probably from the Bahamas as well, take whatever is left and cash out. Oh no! /s
But it's alright, SBF said he's sorry.
“Reuters is reporting that at least $1 billion in customer funds at the exchange disappeared last weekend, citing two former senior employees briefed on the company's finances.”
https://www.reuters.com/markets/currencies/exclusive-least-1...
There is a reason US regulated exchanged with KYC don't deal in XMR.
It's not OK that we hugely reward taking risks to capital and then largely isolate the "risk"-taker from the consequences of failure when they materialize.
List of countries with extradition treaties with the USA: https://2009-2017.state.gov/documents/organization/71600.pdf
this person absolutely knows that they can kick leadership when they're down and that all blame will go to the leadership
it doesn't require being an "apologist" for leadership to see this vulnerability. Council and compliance all resigned, the ceo resigned. Any semblance of checks are gone and any rogue developer can use their keys on anything, rumor now is that an app update went out turning them into malware.
its equally as plausible as just a cringeworthy vendetta of spiraling founders, dumber things have happened in crypto. smart things have too, I’m leaving towards a smart thing
All that said, I’m not surprised at where we are today.
The rules that aren't are so few they may as well be rounding errors lost in noise.
They buy/make a lot of rules, but there's still (currently) a ton more to constrain predation.
(The more money you have, of course, the easier it is to game a more complex system...)
Are you actually buying into SBF’s pathetic ideologies? Or are you more referring to Satoshi’s white paper when you refer to “altruistic motives”.
I can’t understand how anyone would take SBF seriously. He’s a smug charlatan who converted funny money to real money so that he could dump it into politics for his own aims, all while calling his actions “altruism”. Biggest false virtue signaler of all time.
There's little altruistic about an emission that allocates half of all supply (first four years) going to early miners including Satoshi himself, and leaves only crumbs for later generations.
When they could instead minimize the problem (or limit it to the pre-existing fiat inequality) with a pure linear emission, i.e. fixed block subsidy.
The resulting high supply inflation rate (1/n after n years) would have the side benefit of deterring speculation, and keeping prices (and hence environmental impact) low.
Less fine if they won't and someone else will.
That so many people at FTX called themselves "EAers" or "subscribe to the philosophy of EA" screams charlatanism to me. That it became entwined with the Crypto community is no surprise to me.
It reminds me of the many many "churches" in Africa that tell people great fortune will come their way if they are loyal to this particular preacher or whatnot. [2] It is obvious to me those are a scam. Perhaps more akin to Scientology - creation of a VIP club - the less sense it makes the better?
I've tried to read about Effective Altruism and my conclusions are that it is immature gibberish and these proponents are not fully formed emotionally intelligent adults. [3]
> SBF ended up hanging out a lot with his younger brother Gabe, who was living in an EA commune on nearby Stuart Street.
Communes - but it isn't a cult right?
[1] https://en.wikipedia.org/wiki/William_MacAskill
[2] https://www.nytimes.com/2002/03/13/world/africans-fill-churc...
[3] https://web.archive.org/web/20221027180943/https://www.sequo...
At its core, EA asks what the most effective way to contribute to humanity is. Some of the thinkers are mature and have produced amazing projects, givewell being an obvious example.
There are definitely some weirdos affiliated with the movement, but I don't think that that discredits its approach or philosophy.
See: all human history.
The essential trust anchor will always be transparency that directly affects a person in society. Anonymous money and anonymous power will be exploited.
https://en.wikipedia.org/wiki/The_purpose_of_a_system_is_wha...
"The bureaucracy is expanding to meet the needs of the expanding bureaucracy." from (supposedly) Oscar Wilde
+
Survival of the fittest to survive, from Charles Darwin
?
(This is a serious question, I have been pondering it for years now...)
How do you know that? It says explicitly: "52 contributions in private repositories" between November 1 and November 11.
What's interesting is that a lot of the FTX people on the about page (https://about.ftx.com/), including Gary Wang and Dan Friedberg have deleted their LinkedIn accounts, whereas they were available earlier. If they're deleting something so harmless, then who knows what else they are deleting and covering up.
https://www.goodreads.com/en/book/show/21230193-the-washing-...
The update box is clearly based on their pre existing popup used for things like 2FA.
Could this popup have been modified with new text and linked to a new malicious site without an app update on ios or android?
Or, could the popup only function if it was already coded into the app waiting to be activated? Meaning premeditated
You could also serve a change like this with an OTA update, again no app store review required, which ios and android allow (as long as you don't fundamentally change the app, and even then they could only catch that retroactively.
Not sure if they'd care if you load it in a webview as long as the UX wasn't substantially different. I seem to recall getting bounced to web auth flows pretty often.
mtGox was so early in crypto, there wasn't any institutional capital or major players, mostly retail/regular folks experimenting with shiny new tech. FTX is an intermingled web of retail, institutions and big name investors as well as having their own investments, huge donations to politicians, lobbying arm, etc. The fallout from this will set us back for years.
I can’t imagine a series of actions that would be more destructive to the industry. The actions don’t make sense unless they were taken to maximize the potential fallout.
The deep regulatory and political connections are also interesting…
I think the idea that this is some kind of 4D chess move by regulators is a convenient way for the gullible idiots who believed in this stuff to put the blame on something other than their own credulousness. The guy basically admitted to running a Ponzi scheme. Why did you continue to trust him???
[1] https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...
His actions since Alameda blew up were not rational, even if we assume that he was operating a Ponzi scheme the entire time.
He bailed out as many failed projects as he could and attempted to make investments with funds he did not have after the collapse of his ponzi started.
A ponzi operator who sees their house of cards collapsing is going to look for ways to get more money into the ponzi unencumbered with the hope that they can make back the losses before anyone notices.
They are not going to allocate what precious little capital they still have to investments that do not contribute more capital to the ponzi.
Yet this is exactly what SBF did.
It doesn’t make any sense.
Yet the regulation authorities are considering (that SBF literally authored) does very little to address the root causes of centralized exchange collapse, and is more or less designed to give power to regulators first and protect investors as a distant second.
What is needed are proof of reserves that include both assets and liabilities for centralized exchanges.
Centralized exchanges shouldn’t be able to lock up 100mm USD worth in customer Ethereum deposits for staking, when their exchange allows someone to buy that 100mm USD in ETH and withdraw it from the exchange before they can unlock the ETH and use it to fund the withdrawal without delay. If the exchange is going to allow customers to stake ETH on their exchange, the actual customers' ETH must be staked, and shouldn't be accounted for separately than the staked ETH deposit.
That is the core of the issue with centralized exchanges that play shell games with customer funds. They create financial risk if customer deposits are not backed 1:1 and mirroring the financial decisions of the depositor. Anything less is a ponzi, no matter how much window dressing is applied.
It's worth noting that banks are ponzi schemes, but they can borrow funds at the discount rate at will, and must meet capital requirements, so the damage their ponzi schemes can cause is limited. There is no lender of last resort in crypto. Centralized exchanges cannot behave like banks!
Also, SBF was a billionaire hobnobbing with politicians and celebrated by Forbes. Karpeles was some confused dev on his computer who loved his cat and wanted to build a coffee shop.
SBF's failure is going to have larger consequences outside the crypto sphere.
SBF just stumbled into money and spread it around, like the Oculus guy.
Anyways, through all this saga, I see ETH is still at $1200, which has held pretty well. I think the right price is around $600, how it was on Nov 2020, before all speculation. The rest of the price is just people playing around. But that's not what ETH is for, and these high prices are hurting it's real goal.
I'm definitely still holding crypto. Mostly ETH, because I believe in the core technology. I've done some smart contracts and have a couple ideas for the future.
But man, I surely hope all cryptos crash and burn this time, so that speculators stop polluting the technology.
However I’ve grown less confident in ETHs longevity following the move to PoS. I’m concerned about the centralization of control and influence (eg transactions being dropped, tornado cash), lack of ability to withdrawal staked ETH, and general lack of trust created by the extreme number of scams. How do you view ETH long term, particularly wrt the proximity it has to these seemingly endless scams?
Why $600 and not $351, $17, or $15,000?
What fundamental reason is there for any specific price?
Even people/groups using it for putatively useful purposes, those purposes often tend to be 10x more complicated or risky than standard financial mechanisms (or, they are using crypto specifically for various forms of money laundering).
Almost nobody cares about optimizing for real world use, just optimizing for "price goes up".
[1] https://www.arthurkoziel.com/generating-ethereum-addresses-i...
Because any profitable trader will tell you just how stupid that logic is.
ETH provides value but it’s moved to an unproven model.
The who crypto ecosystem is filled with charlatans and crooks who want to rob you and your only other alternative is to be your own bank and store in a cold wallet. Not something normal people are interested in.
That process is not at all streamlined for the layperson, and the structure of crypto has only existed to make it harder, and to further divorce from what could otherwise be a straightforward process for 99% of folks.
1: https://www.coindesk.com/policy/2022/11/10/ftx-violated-its-...
"If you look around the table and can't see the chump, you are the chump"
"Not gonna" is wildly different from "cannot". So are you sure they physically cannot use your funds? If that's not the case, their promise is worth just the price of sending that email to you.
Ah, spoken like a true middle class Boglehead.
VTI/VOO will not change your life, even after 30 years. Broad market ETFs are not worth the risk.
You’re better off doing bonds (little to no risk) or crypto (high risk, more likely for life-changing generational wealth compared, even compared to FAANG SWE TC).
By that measure, the people who had their life savings in FTX (and Celsius and Luna before that) have certainly succeeded.
Investing in total-market index funds is the single best strategy for the average investor. (In fact it's so good there's a proof! [1]) If you invested $10000 in the total US market in 1992 (30 years ago) and never touched it again, your inflation-adjusted balance today would be $72452 [2]. That's an insane 7x of real growth that requires absolutely no effort on your part. Even if you did a more conservative mix of 60% stock and 40% bond (VBMFX) you would have 4.5x real growth.
[1] https://web.stanford.edu/~wfsharpe/art/active/active.htm
With crypto you're not investing in anything that will produce a positive cash flow. Bonds and the stock market actually produce cash flow.
Banks in the US can do it, but only with the excess of accounts containing more than $250k.
https://debank.com/profile/0x59abf3837fa962d6853b4cc0a19513a...
Currently at ~$390M. It looks like they're trying to swap most of the tokens they received into ETH on-chain.
That wouldn't be obvious at all to me; the lowest-risk investment in my country (federal government bonds) is currently offering over 13% interest (https://www.tesourodireto.com.br/titulos/precos-e-taxas.htm).
To guarantee an 8% payback in crypto is a completely different game, and there's a significant downside for someone taking the deal. The expected return rate is always going to be negative on a proposition like that.
FTX was paying well above the risk free rate (currently 3.25-3.5%, it’s been climbing since January 2022), implying they were taking risk to earn the yield they were paying.
I think this is an unfair characterization of people that keep large sums on exchanges. It’s not unreasonable to trust a company worth billions to hold your funds. Some might even argue an exchange is safer than a hardware wallet in the sense that if you physically lose the wallet, or completely forget the password, you’re SOL.
No one expects a multi-billion dollar exchange to vaporize over night. All that has changed this week. However, I don’t think it will have much impact on people storing their crypto off exchange. What I do expect is that reputable exchanges will start being more open about customer funds, and audits of those funds.
Actually that is exactly what us 'crypto sceptics' have been saying the whole time. All of crypto is an accidental or intentional Ponzi scheme sitting on top of a vague promise of "democratizing finance"
Except for everyone who has?
We don't expect banks to vaporize because they're FDIC-insured with extreme regulations on their lending/investing, highly regulated.
But crypto exchanges are the wild west. Totally vulnerable to both hacking and ponzi scheme fraud. Essentially zero regulation or customer insurance. And "vaporizing over night" is how it always goes -- to quote the famous phrase, you go bankrupt slowly and then all at once.
So it's actually incredibly unreasonable to trust a company with essentially zero oversight to hold your funds.
And sure, there can be a movement towards more openness about funds/audits. But now customers have to decide... which auditors can be trusted to review the numbers, when it's the exchange selecting and paying the auditors? How can you even know? And do the auditors provide any defense against hacking?
The reality is most people outside of the HN bubble trust billion dollar companies. Crypto or otherwise. And when I say trust, I don’t mean in the sense that they think the company is doing any moral good, but that they expect a product or service in return for payment.
You don’t question that the gas you purchase at a gas station is in fact gas, and not water. Why would a sensible person expect a billion dollar exchange to suddenly halt withdrawals?
The point of my comment was that most sensible people would expect a billion dollar company to hold up some aspect of the bargain.
Entrusting a company with your savings is an entirely different matter. The only reason people trust banks is because of government regulation and insurance. And sensible people are well aware of FDIC insurance, and of how losing all your money was not an uncommon thing back in the days when there were runs on banks. Sensible people are also aware of Enron and Lehman Bros and Bernie Madoff. These aren't obscure references -- they're household names.
So no, I disagree completely -- sensible people absolutely do not hold large quantities of money on unregulated, uninsured crypto exchanges. Entrusting your savings to an unregulated, uninsured company only 3 years old is a level of risk eons beyond trusting a gas station to fill up your car.
I’m not sure about this. Most people I know outside of tech and finance do not trust crypto at all. They inherently mistrust the concept.
“How is it worth anything at all?” is a common question. “It’s just little things on a computer. It’s not real money.” These people would not trust a company that takes your real dollars and gives you bitcoin.
I would be willing to guess that a large portion of the country shares this attitude, especially older people and less technical people.
Ooh, I have an analogy! If I park my car at the airport while I go on vacation, I expect it to still be there when I get back. I don’t expect to return from my trip and discover that the airport let the car rental company use it while I was away and now it’s gone because someone crashed it.
On the other hand, someone in this thread pointed out the yield that was offered to customers with FTX accounts. [0] I would be more suspicious of a parking lot that said, “Hey, you can park here for free. In fact, do you have any other cars? If you park them all in our parking lot, we’ll pay you $x per day!”
The difference to FTX is that FTX hides the crime in a foreign country in a way that a car thief cannot.
See: the vast majority of the population (even within crypto) that can’t figure out how to setup a wallet in the first place. Then, if you get that far, you can join the hordes of people that lose access to it, dig through garbage dumps for a laptop, have malware that inspects the clipboard and replaces addresses, make a wrong click in Metamask and get cleaned out, etc, etc, etc.
1) With chains that support them...
2) They're ridiculously complicated and convoluted. The fact they're suggested by the crypto community only further demonstrates my point about the crypto ecosystem being completely disconnected from reality.
3) They don't do anything to address the other issues I raised.
If an exchange goes bust, not your keys, not your coins.
There is always an answer as to why it it is your fault, which is why it will never really catch on.
I am no fan of crypto myself, but it's interesting to think what would have to happen for crypto to burnish its image.
Would key people have to voluntarily form some sort of coordinating council and self-regulate? Would they have to invite governments to regulate them better? Whatever the solution is, I'd be highly surprised if it could be done algorithmically and reassure anyone.
Maybe this is part of the hardening of these systems? Part of the evolution which grows a thicker skin?
What about all the trials of traditional currencies we all know and love?
Not really a crypto fanboy, but I'm not sure this means the end of anything.
"John Law - The First Financial Engineer - A History of Paper Money and The Mississippi Bubble" :
This is a human failure. FTX didn't collapse because of the technology. It collapsed because of human error.
The fix is rather simple. If an organization looks like a bank and quacks like a bank; it should be regulated like a bank.
Is there any crypto out there without humans ?
Is there an undo button to reverse the transaction?
All financial systems involve humans
What OP is referring to is that you don't need to trust people if the dex is on-chain and verifiable. FTX was a non-transparent and insolvent centralized exchange which wouldn't be possible if it was on-chain because anyone can see the funds that are available and the protocol would not allow leverage backed by non-existing collateral.
> Is there an undo button to reverse the transaction?
No there isn't. This is a double edge sword.
> All financial systems involve humans
To a degree, but centralized exchanges have more knobs controlled by humans while an on-chain dex and just be deployed once and require no human intervention. A dex can be audited fully on-chain and anyone can see if the contract has any master holder keys. The FTX fiasco is because they own all your crypto because they have the master keys. The future of finance is people being in charge of their own money and where no unexpected entity can arbitrarily inflate the supply, which is only possible with crypto.
The blockchain is perfect when everyone acts in good faith and makes no mistakes.
In the real world, that's not the case. Unfortunately, you need centralized institutions to regulate financial transactions, control the supply of money and enforce laws when they're broken, reverse mistakes when they happen.
> The future of finance is people being in charge of their own money and where no unexpected entity can arbitrarily inflate the supply, which is only possible with crypto.
This is not the future, and it'll almost certainly never happen with crypto.
I think this says it all.
What do you mean? Are you saying FTX wasn't hacked by an anonymous hacker?
Banks reverse transactions sometimes. It sounds like in many cases the reason they can't be reversed is because the money got converted into cryptocurrency.
>Wire Fraud Recovery is Difficult, but Possible[1]
>When the stolen funds arrive in the fraudster’s bank account, they engage a network of money launderers who immediately withdraw funds in cash, wire the money to a number of different accounts and/or convert it to cryptocurrency.[1]
>A full recovery of lost funds was only possible in 29% of cases. In 40% of the cases, less than 10% of the funds were recovered.[2]
That means that 60% of the time at least 10% of the money is recovered.
>Cyber perpetrators are moving stolen funds between bank accounts and cryptocurrency wallets at a rapid rate.[2]
[1] https://www.certifid.com/article/how-to-recover-from-wire-fr...
[2] https://blog.alta.org/2021/04/survey-title-professionals-tar...
* I think it's the same for banks. I think banks also mainly operate on abstractions built upon cash.
* An attacker who wants to steal physical cash needs to be physically present. That means there's a more limited set of people who could attempt the attack. With hacking, people across the entire world can attempt the attack. With physical attacks, you're at risk of being physically apprehended and caught through physical investigations. With hacking you can be behind proxies and avoid getting caught. Additional, with hacking you can do the hack from a jurisdiction that won't care, so even if the victim and the victim's government know you did it, you won't face any consequences. You might even be on your own government's payroll.
And how would they implement KYC/AML regulations which are fundamental to banking ?
If/when the movement of cash/crypto is peer-to-peer or interacting with a machine only (a machine that gives quarters for dollar bills or a DEX, for example) KYC is entirely unnecessary.
It's physically large so you can't move it between countries with drawing attention from customs and security. You can't exchange it between currencies easily since brokers are required to implement KYC/AML. Banks have automatic triggers on their internal systems to notify regulators if you deposit/withdraw large sums.
And if it's being tracked then washing it requires you having to go through exotic means like poker machines since all simpler options have been locked down over the decades.
It's one of the reasons crypto is so popular with states like North Korea, Iran etc because it's scalable enough to allow them to move billions.
The thing is that "not being regulated like a bank" is exactly what many people like / liked about it. (Yield farming, using DeFi for mortgages, etc.)
What I'm saying is that Crypto seems to be headed to being taught alongside, if not the Therac-25, then the Mars Climate Orbiter (which was lost to some people working in metric vs standard.)
It's one of the reasons the classic financial system works so well because it has the flexibility of manual fail-safes in cases where mistakes have been made. Smart Contracts will never really work unless it has the same.
We've managed to get computers to do some really batshit stuff. Drive cars, make art, algorithmically trade to a level of success a human could never dream of, etc. I don't know if a solution to the problem of managing the stability of a currency is around the corner, but I'm fairly sure somewhere in the future it exists.
And then, I can't help but think of how just about every disaster we've had in the financial system was a result of the humans with their hands on the economic knobs being knobs themselves. The solutions we provide when in crisis wouldn't be necessary if we didn't have such a strong tendency to drive ourselves off cliffs - not to mention that our current financial system has gotten so complicated I'm not sure there's anyone out there who truly, thoroughly, groks it without being reductive.
Might cost $1.15 to mint a new USD-coin redeemable for $1.00, but I suspect there would be an appetite.
Massive volatility and the occasional collapse of a crypto-bank are probably hindering the appetite of many people for anything in the crypto market. That population probably would dwarf any yield-farmers.
An attestation report available 24/7 should be generated easily if you’re doing things properly, as well as frictionless burning and minting.
Note: I work for Glo, a non-profit stablecoin, so have a vested interest in this space. I do not and am not speaking on behalf of our group.
There are several. I compiled a list of them a few months ago.
Communism works, it's just human failures?
The measure of whether something works is whether it prevents human failure.
Regulation works but it was just human failure:
However, socialism is not communism, which is what the GP comment mentioned.
https://www.federalreservehistory.org/essays/glass-steagall-....
Banks in other countries were affected too, despite regulations.
There exist Ponzi schemes which have disguised themselves as cryptocurrencies, but the idea that all cryptocurrencies are Ponzi schemes demonstrates a complete ignorance of what a Ponzi scheme is.
Why? To me a ponzi scheme is where the earlier "investors" get paid out with the money of later "investors". That's it. By that definition it's quite the "decentralized", somewhat stochastic ponzi.
In crypto, none of that is hidden. It's widely known that dollars cashed out by earlier investors come from the coffers of later investors. Since e.g. Bitcoin doesn't deceive people about being a profitable company, it's by definition not a ponzi scheme. It's important to use this terminology correctly.
By the way, who is the "they" that your sentence refers to?
But if they're honest about something being a scam how can it be a scam? Seems like a paradox.
I've got bad news. It is still a Ponzi if people are "honest" about it being a Ponzi, it is still a Ponzi if it started out as an investment idea and it went Ponzi as losses added up. Arguing that clear Ponzis aren't really Ponzis due to some kind of semantic rules is a gigantic display of "copium".
The only real difference is the distributed and decentralized nature of the scams. And the CEO of JPMorgan has described crypto coins exactly as a "distributed Ponzi scheme" before Congress.
If you wind up paying out redemptions with new deposits as fast as you can, right before you fail hard, then it was a Ponzi all along. That's it. That's the definition.
Why do you believe it is bad news to me? It's just semantics.
It literally isn't. Please go back to the definition, which requires a specific type of deception. If you wished, perhaps you could call crypto some kind of gamble, confidence game, or other category of scam.
> Arguing that clear Ponzis aren't really Ponzis due to some kind of semantic rules is a gigantic display of "copium".
From your tone it seems like you think I'm trying to defend crypto in this thread. I'm not. I'm trying to defend the meaning of a precise and descriptive term so that it doesn't get watered down to the point of being synonymous with "scam". Because if that were to happen, we would lose a useful phrase in the English language.
It really ticks me off when people knowingly use terminology incorrectly like this out of anger. Just call crypto a scam or a con if you want. There's no need to let your anger leave a mark on the English language itself.
> And the CEO of JPMorgan has described crypto coins exactly as a "distributed Ponzi scheme" before Congress.
Well he was using the term "ponzi scheme" incorrectly then, and should have used a more general term like "scam". Really, this isn't hard. Just read the definition.
It's also worth noting that JPMorgan executed their first trade on a public ("crypto coin") blockchain last week, so maybe he ended up changing his mind? Or maybe there's some internal consistency with JPMorgan investing effort in things they believe to be ponzi schemes - I'm not one to try to make that distinction.
> If you wind up paying out redemptions with new deposits as fast as you can, right before you fail hard, then it was a Ponzi all along. That's it. That's the definition.
That's not even how cryptocurrency works. Not even beanie babies or tulips worked like that.
And that is how cryptocurrencies work. There's net inflows of currency, and net outflows of currency and there is a systemic bank balance at any one time of currency. If outflows exceed inflows for long enough then the balance is drained to zero and the music stops. That is a Ponzi. Madoff's Ponzi worked up until the 2008 recession hit him with redemptions and outflows and his bank balance got drained.
Key phrases:
* the scheme leads victims to believe that profits are coming from legitimate business activity
AND
* they remain unaware that other investors are the source of funds.
Neither of those apply to cryptocurrencies. Nobody believes that Bitcoin conducts business activity, and everyone is transparently aware that other investors are the source of cash-out funds.
> There's net inflows of currency, and net outflows of currency
Commodities (fungible property of market value, like cryptocurrencies) don't have net inflows or outflows. Commodity prices are determined by order books which are in turn determined by supply and demand, not by capital flow. When a buyer and seller meet and exchange money for a piece of property (like a bitcoin), there is no "inflow" or "outflow", property just changes hands.
> there is a systemic bank balance at any one time of currency.
There is no "systemic bank balance at any one time of currency". That's not how cryptocurrency works. Where is Bitcoin's bank account, and what is Bitcoin's bank account balance?
> If outflows exceed inflows for long enough then the balance is drained to zero and the music stops.
Cryptocurrencies have no such inflows, outflows, or "balance". They aren't like investment funds or companies - they behave like physical objects, like beanie babies if you will. The beanie baby crash wasn't caused by any kind of beanie baby "balance" being drained to zero, it was caused by people collectively deciding that beanie babies were no longer worth a premium price.
> Madoff's Ponzi worked up until the 2008 recession hit him with redemptions and outflows and his bank balance got drained.
Bitcoin does not have redemptions, outflows, or a bank account. It's a series of rocks that people trade between themselves, sometimes at a higher price, sometimes at a lower price.
You seem to be confused about the definition of cryptocurrency. Should we go over that next?
Yes I got ranted at for suggesting "fools racing towards a cliff" as a better description. These threads appear to have attracted a lot of people looking for a fight and will jump on any nuanced post as a "pro" side.
Perhaps it results from the human tendency to try to separate "good guys" from "bad guys". Whatever it is, I find it really gets in the way of productive discussion.
> How long do we have to wait to see crypto working?
BTC (on chain) is still working as intended, after all these years.
Crypto generally means digital currency, does it not? I think leaving them out would be actually misleading.
> BTC (on chain) is still working as intended, after all these years.
Working in what sense?
That you can securely and cheaply transact value without a third party being involved?
That governments can’t directly block your account the way Trudeau blocked protestors bank accounts?
Probably a few other ways as well ...
Just a week ago someone got cought and the fbi took his 3 billion dollar worth of BTC.
Sending crypto to someone in Iran or Russia is against the law independent of how you do it.
And just because you can send BTC to Iran someone in Iran also needs to exchange it to something real again.
While banking is more restrictive, when you go to your bank with your passport, you actually can recover your account. I know someone who lost 10k because he lost his key.
For most people it's saver and easier and they are not affected and don't care about all those BTC/crypto benefits at all
Here's some actual data you can look at: https://mempool.space/graphs/mining/block-fee-rates#all
Look at the "Min" fee rate; regularly very close to 1. That's $0.02 at current prices.
Of course you can even pay 0 but you know it's not the normal someone would wait days for the transaction going through.
You clearly did not use Bitcoin often enough otherwise you could just looked the spikes up yourself. That first corona year was even worse with the fees.
I literally posted a source showing you it's very cheap. The minimum fee is the lowest fee you'll pay to get into the next block.
I used Bitcoin way back in 2010. Though I don't understand why that makes a difference since you can look up the prices in hindsight.
One thing to keep in mind: laws are not always just.
I believe it's okay to sometimes not follow the law, if the law is unjust. One example: in WW2 Germany there were many laws against minorities that were unjust [0]. Most law obedient people would follow these laws regardless.
Perhaps a person want to support his family in Iran or Russia that's going through difficult times. And perhaps crypto is the only way to help. In such cases I think it's okay to oppose the law.
---
[0]: https://encyclopedia.ushmm.org/content/en/article/the-nuremb...
Whether it's accurate or not, I imagine non-experts would regard the difference between BTC and FFT as pretty negligible, perhaps akin to the difference between "social media" and IG vs. Reddit.
https://mobile.twitter.com/whale_alert/status/15916165982801...
This doesn’t happen with BTC because it wasn’t created out of thin air.
It's certainly working on destroying the planet with its obscene energy requirements.
Destroying the planet = Can't question it, can't argue about it, it is the end all of all arguments. How could you ever oppose something that destroys the planet?
They all sound the same: https://en.wikipedia.org/wiki/Greenwashing
Riddled with subjectivism. You cannot do less since there are no objective limits to what is "acceptable levels of destruction of the planet" means. It has a different subjective weight to different entities arguing the position. In the limit, this would mean we erase humanity all together and leave the planet alone.
You can bully a lot of things your way before any one can speak up against it. There is a level of insidious moral superiority built into it which makes it prime for exploitation. Corporations are doing exactly that.
"Based on the estimated average growth rate of bitcoin mining operators using vented methane of 6.9 MW/month, the Bitcoin network will become Carbon Negative in Dec ’24."
Oh and increasing the power usage of this fire pile will, as you say, “improve the current situation”?
Your point is that the only way we can avoid burning methane is to use that to power bitcoin mining rigs???
Burning methane (flaring) is most definitely an improvement over not doing it. That's just a fact. It accounts for about 20% of global emissions and is 25 times as potent as CO2. https://www.epa.gov/gmi/importance-methane
You would use Bitcoin mining as a monetary incentive to flare methane. You could do other things but it requires more infrastructure investment and might not even be possible in certain locations that are far from where the electricity would be used.
Bitcoin mining results in a profit.
Why would you pick the first one?
Transporting miners is not the hard part, you just keep them in containers. What is hard is building the necessary stuff to actually flare the gas properly.
We could also use this energy for better things than Bitcoin.
And while BTC doesn't make any value besides moving money from one person to another, it also produces hardware garbage like ASIC chips and power supply.
It also steals demand from others too.
There is only downside for most of us than benefit of allowing Bitcoin mining independent of it's source.
If there are landfills out there that are just spewing methane gas (20x worse than CO2, btw) into the atmosphere, why not make sure that is burned and used more efficiently? Please show me a realistic plan to do this. Bitcoin does it without forcing anyone and without taxes directed towards it.
Where are landfills too remote to transport electricity away from?
In the US 70% of the methane from landfills is vented, rather than flared. That means that for some reason, either it's too expensive to do or something else is blocking this. And that's just the US.
You can also imagine that landfills in the developing world are better targets. Infrastructure is not as good there as it is in the US or in Europe.
Easy to solve with laws. Shouldn't be allowed anyway to just pick the good things from a gas field...
It's not a gas field, it's a land fill.
I mean… Cyberpunk 2077 could run acceptably on an integrated 65W APU but instead I chose to crank everything on max with ray tracing through a 4090 just to see some dumb frames on a screen that are discarded at a hundred per second.
And I don’t ever remember having to ask permission to use the kW h I’m paying for.
And its beside the point because again its none of your business.
Yes, of course, I am absolutely suggesting that overspecced gaming PCs played by a minority of gamers in their spare time don't use more electricity than a medium sized developed country (or indeed the 24/7 running of industrial scale server farms deploying chips designed because even the most powerful gaming chips weren't anywhere near energy intensive enough to win the energy-burning competition). Why would you possibly consider the small number of people using high spec gaming PCs a few hours a day use more electricity than a developed world country?
Why don’t you go for power companies instead and demand clean energy investments? Might be a better use of your activism instead of just going for people using their own stuff in a way you don’t like. It’s not going to end well. I’m pretty sure the insane degrowth narrative will target gaming or other power intensive recreative uses sooner or later but that’s another discussion.
If these frames were really discarded (that is, not shown on your screen), then yes, it would be a waste. But my understanding of your example is that these frames were displayed, and their light reached your eyeballs.
Free markets are great for a lot of things, but pricing in externalities isn’t one of them.
https://www.politico.com/newsletters/morning-money/2022/10/2...
If many people in this space are advocating for decentralized exchanges, how come everyone uses centralized ones?
If there's ever a time and place for voting with your wallet, this seems to be it, and the wallets are speaking loudly and clearly.
A lot of people put money on CEX because they are ignorant, or willing to take on some risk for slightly cheaper and faster trades. Those people probably regret their decision now. If they used Uniswap and Aave they could not have withdrawals paused because of one company’s insolvency.
Convenience.
For a cryptocurrency owner taken at random, I think it's likelier that they make a mistake with their private key than they lose tokens held in a Coinbase (or another CEX among the less dodgy, regulated, etc.) account.
Exactly. I've long wondered if there's any way to overcome this without essentially going back to a 'trusted broker/custodian' model
I had someone try to tell me blockchain voting would fix Russian democracy, because it would ensure transparent, accountable elections. OK, so how are you getting it in there? Just going to stroll into the Kremlin and make the current leadership implement it? You’ll be laughed at shortly before your arrest. No, fixing Russian politics is primarily a social issue. Transparent, accountable voting could be part of a possible future effort at reform, but first you need to somehow gain the power to implement reform at all.
Coming up with a software solution alone does nothing. And this is what is often missed.
“I can imagine a better future in which my amazing software solution plays a pivotal role, therefore if I create that software, things are sure to turn out that way”
Here are other examples:
- promising self driving cars (driving is more than a technical activity, it's a social activity. AI is nowhere close to driving the easier technical aspects, much less the more complex social aspects)
- AI is already better than or will replace doctors. As of all doctors do is look at symptoms and up with diagnosis. The social part of medicine is the larger job by far, not diagnosis.
- algorithms can't biased. My AI predicts some function that has some real life impact. That the input data is biased, and therefore the output data is just as biased or even more biased. Well that's not my problem. I only build models, and lines of codes are not biased. But the result of your work is being used in the society to perpetuate bias. It's not okay to remain wilfully oblivious to that.
Regulation can make things more secure, but I don't think it can realistically stop all attacks. Regulation is slower than attackers. The ability to reverse transactions is what's really needed to prevent attackers from getting away with money.
My point is that this decentralization is bringing in a risk that traditional banks don't have. So saying "regulating it like a bank will make it as secure as a bank" is incorrect.
I also think FTX has been violating plenty of them already from the sounds of it. They probably thought they were being clever, but wouldn't pass the "duck test".
And with a lot of people storing their money in these major crypto banks , what we now have is a fairly centralised structure which kind of defeats the purpose of crypto. Worse, these banks also hold each other’s tokens similar to what your normal banks do. And if that’s not enough some of them even do fractional reserves and use the real money they get for investing.
This kind of comment is the epitome of the Western privilege -- your governments cut off entire countries from the banking system, deny their own citizens access to banks because of their political beliefs, and then tout the alleged superiority of your credit cards, which are now denied to truckers and Kanye West by the same companies that were happy to do business with Pornhub when they were knowingly facilitating the monetization of child sex slaves.
Credit cards and United States dollars are the tools of thieves, thugs, rapists, and warmongers. Bitcoin works for the use case of not staining your hands with the blood and tears of their victims, at the very least.
There are more countries than India, I’d suggest maybe taking a look at South America, Africa and Asia.
By the way many African countries have a robust mobile phone based banking infrastructure. Nothing to do with cryptocurrency. See https://qz.com/africa/2161960/gsma-70-percent-of-the-worlds-... for example.
> Crypto payments take much longer time than traditional credit card ones
Everyone in India can process an American credit card? Indians are magically immune from political censorship on the basis of the payment card associations?
"Guns don't kill people, people kill people."
defi is rife with hacks theft and rug pulls. but a form of fraud that is built into the entire ecosystem are tokenomics that carve out allocations of tokens to early holders, so they front run every one else.
this cannot be escaped - there is no refuge from the grift built in to the entire ecosystem. decentralized is a lie propagated to support a scam on everyone who got in later than early holders.
It’s never going to be useful for that, though. It doesn’t solve any of the problems that small, closed groups who know each other and have legal recourse have.
- Successful or semi-successful 51% attack (maybe state sponsored)
- Global energy crisis/crackdown on mining
- Global economic crisis of the scale where people desperately need cash/commodities and can't waste their money in speculation
Crypto is immensely more centralised than the American banking system. That’s what makes it resilient. Every wallet’s state is always globally known. Compare that with the series of subpoenas one must serve to learn what’s in whose bank account.
Might want to look into the rug-pulling with shitcoins, NFTs etc.
That is far more insidious since it is targeted at young adults/children by influencers such as Jake Paul, Lil Uzi, David Dobrik etc.
But... they can also be programmed NOT to allow terrible human behavior. Banks do not have this feature.
So yes there maybe terrible human behaviour at times but very quickly it results in either (a) people being fined or going to jail or (b) laws improving to prevent it e.g. KYC/AML.
Also as someone who works at a bank there is a lot of code which governs what people can and can't do.
Maybe, if you are a god tier programmer. On a long enough timescale the probability of your crypto project ending up on the rekt.news leaderboard is 1.
Yes, because that's where the actual value is at the end of the day. Regardless of how much people want to pump crypto, when push comes to shove, the recognized value of crypto for the vast majority of people is it's conversation rate to fiat currencies.
The problem is that regulators "confuse" that (or pretend to) and any regulation that comes out hurts the users, and the DeFi space, instead of focusing on centralized business like FTX that are outright stealing users funds.
Also what FTX did is without a doubt already illegal, it's not like it's some kind of loophole or legal thing they did.
Arguably, fractional reserve banks “steal” customer deposits to invest and pay interest in exchange. They have a very particular license from the government and are monitored (and insured) and rightly so - they are very dangerous.
Both exchanges and coins / tokens are going at what looks like very cheap right now.
The reason trustless decentralized crypto currencies were invented: So we don't have to rely on banking corporation's glowing reputations.
Rightly or wrongly.
The logic you're describing isn't incorrect, but I don't believe (and may well be wrong) it makes any difference to the point I made above.
It's still early. Still in the "first they laugh at you" stage, just read HN comments.
There's a literal saying, "Not your keys, not your coins". Only if people would listen.
Doesn't that also legitimatize a hack then? If someone hacks or steals your keys, you can't then turn around and say "but wait, those aren't your keys".
The issue with reversibility is that it’s not just reversibility - it’s also the power for the authorities to take your assets from you.
The question isn’t “do you want to be able to get your money back after it was stolen”, it’s really, “do you want the powers that be to be able to decide whose money it is.” We’ve been lucky to live in a world where “yes” is a reasonable answer. But there’s no guarantee that it’ll stay that way. And crypto is insurance against that possible change.
But either way, it's a tradeoff and that's fine. TradFi is reversible and centralized, crypto is not. Sometimes you want one thing, sometimes you want the other.
I like having part of my assets in a way that can't be frozen, like the people that protested in Canada whose banks accounts were frozen.
This isn't social media. This is Facebook with a centralized website, with centralized databases, that is run and controlled by humans. In fact, if you use a Facebook there is no use of social media for the most part.
There's a literal saying, "not paying for it, you're the proruct". Only if people would listen.
I see no contradiction on shitting on facebook while defending say Mastodon. In fact people were doing this with twitter just a few days ago before $current_thing happened.
The same argument can't be made for crypto exchanges and the industry they occupy also being terrible.
The real reason there'll be regulation isn't because the community wants to be reassured; it's because governments are afraid, and want control over the entire financial system since they believe they can tame "systemic risks" (while using bullshit value-at-risk models; I guess everyone in this story's an idiot). And in the new bull market, when the abysmal idiots want to get rich quick again, you and I might bail them out.
As crypto gets scammier by the year, this crowding-out effect means that the dream of early adopters 10+ years ago, of a world economy running on cryptocurrency, becomes more and more distant.
Combine with rising interest rates, I wouldn't be shocked to see BTC drop below $10K and never recover. Past crypto bubbles have reinflated by exposing crypto to larger and larger segments of the investing public, but I think we may be running out of greater fools. For example, last I checked the number of Americans who own crypto is pretty similar to the number who have an old-fashioned brokerage account.
If there's a great application that solves an important problem using crypto then I imagine most people would focus on the problem and not the fact that crypto is used to solve it; they'd probably even gloss over how the application works.
It's a frustrating situation for someone like me who enjoys geeking out about designs for alternative institutions. I see many ways our institutions could be better-designed -- better aligned incentives making higher ed way cheaper & more effective, stuff like that -- and simultaneously there was so much momentum around crypto, including e.g. El Salvador adopting bitcoin. But somehow they never met in the middle. It sucks that people put their faith in tech geeks like me, and they got let down. Somehow crypto's "solution in search of a problem" never collided with the many institutional problems that desperately need solving.
Well, not like you since you’re genuinely trying to solve real-world problems.
I had that feeling a lot during the dotcom era because you had a similar, although less pronounced, dynamic where some companies were focused on selling their technology as some kind of magic cure for every problem (this was also the era where you’d see startup founders proudly showing off millions of dollars worth of Sun servers running Oracle to process 100 orders a day). We’d get calls from our clients who’d get these shiny presentations but couldn’t understand how something made sense for their business, and we’d walk through it with them and confirm that it didn’t.
Most of those “it’s new and shiny! Buy now!” companies either folded or were acquired at more accurate valuations when bubble money dried up. I remember a couple of sales guys asking about jobs and it was like “you didn’t care what your prospects needed when money was easy, who can afford you now?”
My advice would always be to focus on what real thing you’re making better. If you can’t find one, either leave or have a fallback plan for things suddenly grinding to a halt. Lower-level staff are usually the ones left holding the bag unless your job is very clearly linked to revenue.
Clarification: I'm not actively trying to help people, I just enjoy thinking about institutions in my spare time. Here are some relevant HN comments of mine to give a sense:
* fixing gerrymandering https://news.ycombinator.com/item?id=33517757
* settling antarctica as the planet warms https://news.ycombinator.com/item?id=33483424
* depolarizing social media https://news.ycombinator.com/item?id=33483177
* fixing america's constitutional amendment process https://news.ycombinator.com/item?id=33355325
* getting hedge funds to actually be useful https://news.ycombinator.com/item?id=33274789
* combining the best aspects of both capitalism and socialism https://news.ycombinator.com/item?id=32972790 -- more details here https://news.ycombinator.com/item?id=32974503
I don't have much formal training in this stuff so you should take all these proposals with a grain of salt.
We may not see an environment like that for the rest of our lives.
https://twitter.com/wallstreetpro/status/1591167190996504576
Sam, Caroline, and everyone at the top of FTX and Alameda have very close family ties to key power brokers on Wall Street, which is how they were able to run this scam. FTX has also lobbied extensively for harsh regulations on DeFi, which is a key reason that he was hated by people in the cryptocurrency space, and adored by Wall Street.
The only reason FTX got caught is because of evidence they left on-chain. Any other investment fund might have been able to sweep it all under the rug, but since the massive payout from FTX to Alameda was visible for the world to see, the corruption was obvious, and the whole thing collapsed.
How would another investment fund transfer customer funds to Alameda while being able to sweep it under the rug?
I think the transfer wasn’t the problem. It was illegal, yes. But the empire fell because Alameda lost the money.
Alameda’s CEO: “I use very little math. Being comfortable with risk is important. We tend not to have things like stop losses.” https://www.tiktok.com/t/ZTRxWbctK/
No, stop trying to spin this. It's a stereotypical crypto story.
> Sam, Caroline, and everyone at the top of FTX and Alameda have very close family ties to key power brokers on Wall Street, which is how they were able to run this scam.
Who was Do Kwon's wall street family tie?
> FTX has also lobbied extensively for harsh regulations on DeFi, which is a key reason that he was hated by people in the cryptocurrency space, and adored by Wall Street.
Centralized exchange lobbies against decentralized exchange, isn't that just business?
> The only reason FTX got caught is because of evidence they left on-chain.
Really? Source? From what I know it was just good old balance sheet (probably an Excel file, even) that got leaked.
> Any other investment fund might have been able to sweep it all under the rug, but since the massive payout from FTX to Alameda was visible for the world to see, the corruption was obvious, and the whole thing collapsed
Utter bull. FTX paid Alameda a long time ago. No one knew this story until 2 days ago because none of this works the way you are talking about.
>No, stop trying to spin this. It's a stereotypical crypto story.
It’s worth considering that these things are not mutually exclusive. Why can’t it be both?
https://economics.mit.edu/people/faculty/glenn-ellison
but p.s. the whole comment is worth a paste:
SEC Chair Gary Gensler’s old boss at MIT was Glenn Ellison. His daughter Caroline Ellison is the CEO of FTX sister-company Alameda Research (and Sam Bankman-Fried’s lover apparently).
The GC of FTX used to be lead counsel to Gary Gensler when he was CFTC Chair.
Sam Bankman-Fried’s mother was Hilary Clinton’s lawyer.
Gabe Bankman-Fried, brother to Sam (also a former Jane Street trader), is founder of “Guarding Against Pandemics”. He was a Legislative Correspondent for the US House of Representatives and an advisor to large political donors in the Democrat party.
The family Aunt Linda Fried is a WEF member on the Global Agenda Council on Aging.
The father, Joseph Bankman, is a Stanford professor who has lobbied on behalf of Hedge Fund managers before Congress before (film records exist).
FTX Head of Ventures & Commercial at FTX Ventures, Amy Wu, started with the Clinton Foundation years ago.
Nishad Singh FTX Director of Engineering has spent over 8 million for Dem candidates.
Obama's Commodity Futures Trading Commissioner, Mark Wetjen, was the head of FTX Policy & Regulation.
Chief regulatory officer of FTX is Dan Friedberg was previously a lawyer at Ultimate bet (a site where they basically cheated against players).
Stuart Hoegner General Counselor at Bitfinex/Tether was previously Director of Compliance at Excapsa which was responsible for the Ultimate bet poker software.
2. Energy has become so valuable these days and Crypto tech has become so WASTEFULLY, UNNECESSARILY energy intensive, that the next iteration needs to be as cost efficient and effective as software. Transaction costs need to begin and remain extremely low to none. Only a process that is always cheap to run will be able to take over micro transactions worldwide and unlock true financial freedom for the world.
3. Last but not least, any transaction tech that cannot cash you out cheaply and immediately and easily should be considered a ponzi scheme. Marketing your coin and not allowing people to liquidate it due to natural or artificial constraints, makes you immediately not a store of value but a scam and dangerous to the entire ecosystem of trust.
The current financial system took a LOT of guardrails to keep people from tanking the trust in it for their own self gain. When you lose trust in the system, people pool their money out of it and go buy oil, or bricks, or stocks, or whatever else is actually worth something. If you want to dominate with a tech-based system. Trust should be completely unbreakable - as in identity needs to be absolute and bad actors banished from the system forever or some severe term that works as deterrence.
I would approach the next iteration as software with a very robust test suite - there is a rich portfolio of financial scams out there and your system needs to help deter, detect, prevent, etc, as much of that as possible automatically. All human systems devolve down to policing rule compliance with time.
Draw them in with ease of use that beats current financial tools (transaction fees for commercial transactions for example) and keep them in with trust (any bad actor has only one identity and loses it or is prohibited from using it for a time, - forcing them to use non-digital payment processing with much higher transaction costs.
Exchanges have failed 3-4 times, and it seems they’re part of a currency since people keep coming back to them. So there needs to be a system where I keep having control over my coins while they’re in an exchange: ability to withdraw from the exchange, ability to approve a transaction.
So regulators either come down heavily on these exchanges or they will let retailers continue to get conned.
Also to repeat a minor rant of mine, anyone designing a would be successor to Etherium should think very deeply about programming language theory and consult/engage with experts in that community. Much pain could be avoided by finding types and semantics appropriate to automated contracts.
I would like to see more alternatives, so stop ranting and start building.
https://www.quicknode.com/guides/smart-contract-development/...
I am perfectly fine expressing a criticism without trying to become the next ETH developer. That's a pointless and rude behavior. If you find my criticism uninteresting you are free to simply scroll on.
2. Crypto’s (as an industry) energy consumption is negligible when looking at other similar sized industries. POW is still the best method of mining.
3. 100% agree.
> The current financial system took a LOT of guardrails to keep people from tanking the trust in it for their own self gain.
The current financial system took decades to be rigged properly. It rewards politicians and elites. There’s no denying that. The everyday man is left holding the bag 9 times out of 10. This was the very reason Bitcoin was created. Thinking the government is going to save you is an insane idea.
Except this exists since the beginning?
I feel people are missing the point. A decade ago a guy created some system that allows users to digitally self custody funds without a third party. That’s self regulation to you.
MtGox was not that. Celsius was not that and finally FTX was not that. Binance is not that. Those companies and their tokens conjured out of thin air are glorified digital cassinos folks.
Government regulation? Will it make a difference? The stuff they did is already ilegal in pretty much any country isn’t? By the way wasn’t SBF trying to push regulations to hurt his competitors? Didn’t he funded D and R candidates? Do you really think you can trust anything that can come out of regulation to be effective and not exploitable?
FFS doesn’t FTX US division have a NY bitlicense? That’s probably the most strict license in finance.
As for crypto reputation I see this as a big W for the core principles of self custody. Bitcoin “toximaxis” being right all along. Even here people often reply me they feel more comfortable using a third party. It’s all good but perhaps you should instead trade stocks or idk commodities or wathever?
It's not about crypto, it's about human nature and avarice.
People have short memories, further, people get caught up the hype. If Bitcoin's price starts to bounce, and especially if it manages to approach a new all time high, plenty of people will be on board, in fact even moreso, because the tagline will be that Bitcoin is resilient, it always comes back, it can overcome any crisis.
Furthermore, although it seems like a lot of people are talking about FTX, probably 90% of the people who know of Bitcoin are entirely unaware of this story. I own some crypto assets, and I had never heard of "SBF" and the only thing I ever knew about FTX was that it made an awful television commercial. Never thought about them ever since.
Based on your comment and the rest of HN, many people think blockchain = finance with cryptocurrency and NFTs. That’s what FTX was. Boring. DeFi is only slightly more interesting.
Blockchains like ethereum do run on a cryptocurrency, but the currency is not the most interesting part, it’s just lubrication for interesting applications.
"Freezeable" tokens completely defeat the purpose of a decentralized currency. Why create nodes/verifiers etc if a wallet can be unilaterally frozen, either under pressure from gov't, community, or another entity.
However NOT allowing freezeability allows for massive hacks, either by insiders, poor security, or sloppiness.
Seems the solve is somewhere in the middle, a pool of trusted intermediaries.
1. Including a transaction into a block
2. Block acceptance and propagation
3. Chain acceptance by the client
Everything else is cryptographically locked, as in, a full-chain audit would reveal discrepancies, but these choices maintain internal consistency. You may hate this idea, but it is coming, and the default rule set will come from the jurisdictions. However, they will only have the power of transaction censorship by unanimous consent, total power of block censorship, and almost no control over chain censorship.
I just had a half-baked idea: a chain that has the ability to hard-fork only in small differences, but essentially allows an infinite number of forks and merges in such a way that each transaction is valid if not explicitly invalid. In other words, a transaction fork does not invalidate the proof of an unrelated transaction that descends from the forked root hash. This would have to be a very different kind of hash/proof. Such a chain would greatly reduce the risk of rule modifications such as censoring transactions from an attacker, while also supporting the choice to use a chain without censorship, and enable reconciliation between the two.
Some folks in this thread are speculating this might've been an inside job.
I suspect, it's likelier that hackers had been aware of a vulnerability for some time, had a plan to drain these funds, but decided to hasten the timeline on the basis of the news FTX was going under.
What would you do, if you spent years building a Crypto/Ponzi scam and that you were the first to know that it was going to crumble?
Let it go and face the consequences? Or try to save a few bucks knowing that you don't have much more to lose if it fails?
But what would you do, in this context?
It would be easy. If you're the founder might have special access to the keys, in fact you probably need to for emergency purposes. Whether that's a "hack" I don't know, it seems to just be theft.
The real question is what do you do with the fact that you have the keys? If you are tempted to nick all the money, you might end up in a bad place.
Or maybe, if they are hackers they can use/launder those in some way or another, but if this is SBF behind a mask then he can't?
I am far from an expert about money laundering techniques, but I find it hard to believe that it is impossible to launder, given the context.
Perhaps there's a jurisdiction where it's made a lot easier.
Money laundering can be lossy and even very lossy, the result will always be better than zero.
7-8 digit hacks are often legitimate hacking, but suspiciously-timed 9 digit hacks have been inside jobs in the past.
I'm giving more than even odds to the theory that a top executive of FTX wanted a retirement fund. Let's see if one of them disappears.
This make no sense to me. Thieves in the crypto currency world seize the opportunities before other thieves do: what more do "hackers" need than 600m? 700m? 900m?
Why let a vulnerability unexploited, risking someone else to exploit it before you? Because 600m wouldn't be enough? (and before the price crash it was probably worth way more than 600m).
I don't buy it.
Insider job 100%. Especially seen that it's a know fact it was run by scammers.
It's not as if we were talking about honest people playing it fair. We're talking about a scam.
A more than shady company, ran by scammers.
I call insider job unless proven otherwise.
The telephone, the internet, and crypto share one thing in common. Each technology improves on the next in terms of its ability to facilitate fraud.
As such, I was initially a crypto skeptic, but after studying some of the more interesting crypto projects, I have come to - Bill Ackman (@BillAckman) November 20,
What assets?
Madoff's ponzi was larger, but the recovery rate was 88%. It looks like customers who didn't withdraw in time will end up with 0%.
A lot of this is just gambling. People need to go into it with the mindset that the money will be gone tomorrow, and then be pleasantly surprised if it doesn’t.
See this millionaire who is now worth $10k due to FTX: https://www.tiktok.com/t/ZTRxWq77B/
(I’ll believe it when the coin is in my wallet though. Till then, I mentally moved on a long time ago. It felt like the end of the world at the time, since it was my father’s savings that he’d worked for a decade to save up for his kid one day. Wiping it out over night wasn’t a good feeling, to say the least. But, life goes on, and I was fortunate it was only $11k. An expensive lesson, but one I needed to learn.)
Who operates the site?
The process has been slow (we’re almost at the one-decade mark) but it does seem to be progressing.
Whereas it’s hard to imagine FTX creditors having any hope whatsoever after this.
It's most likely an inside job, either by disgruntled employees or SBF himself:
"In a subsequent examination, FTX legal and finance teams also learned that Bankman-Fried implemented what the two people described as a "backdoor" in FTX's book-keeping system, which was built using bespoke software.
They said the "backdoor" allowed Bankman-Fried to execute commands that could alter the company's financial records without alerting other people, including external auditors. This set-up meant that the movement of the $10 billion in funds to Alameda did not trigger internal compliance or accounting red flags at FTX, they said." [1]
I kept wondering how someone who seemed smart, wanted to help others, and admitted that crypto is a Ponzi scheme could end up in crypto. It broke my brain.
Now I see he was a brazen criminal all along and the world makes sense again.
The lack of legal focus, given the obvious illegitimacy of it all is disgraceful and I can't even imagine the size of the wealth transfer happening through all this.
All sorts of scams, from dietary supplements to homeopathy pyramid schemes are permitted to carry on because fighting them is too unpopular.
Edit: take a look at Twitter. Crypto folks are busy worried that the Us gov will overreact and regulate crypto over this.
Other than the amounts of money involved, it clearly is a religion.
https://scholarship.law.nd.edu/cgi/viewcontent.cgi?article=3...
I’m curious, are there specific ones your referring to, or do you consider all mainstream denominations of Christianity cults?
In Christianity, god extorts adherence through the revelation that there’s eternal life after death and the threat of eternal damnation as punishment for insubordination. The requirements to enter Heaven are acknowledgment and acceptance of Jesus’ crucifixion as atonement for your transgressions (and possibly repentance).
In Islam, god extorts adherence through the revelation that there’s eternal life after death and the threat of eternal damnation as punishment for insubordination. The requirements to enter Paradise are not explicitly defined (aside possibly through dying in a Jihad) so strict adherence is arguable more crucial than in Christianity.
In Scientology, god extorts adherence by eliciting confessions of past transgressions on videotaped counseling sessions and threatening public exposure for insubordination, among other tactics.
Disclosure: I'm agnostic asymptotically approaching atheist
Entirely speculation, but something fun I've heard repeated occasionally:
If this was "just tech", it could find itself regulated easily. (Though this isn't necessarily the case.)
If it's a geopolitical weapon or spy tool of any consequence, then there may be other stakeholders pushing back against weakening it.
Plausible, borderline conspiratorial, but fun to think about.
https://twitter.com/concodanomics/status/1591232063906217984
I realize this doesn’t add much by way of substance but this has been an incredible watch.
I hope someone is keeping an eye on SBF.
They announced the hack and told users not to log in so insiders could get their funds out first, right?
If I was smart, I too would be ripping off all of the cryptobros.
Instead I dumb and do honest work.
B) The unregulated crooks are making it so crypto either will be outlawed or regulated (e.g. central exchanges regulated), so you won't be able to scam for very much longer
C) it's not just crypto bros, many people made the speculative investment who are relatively uninterested in it, you are mote likely to defraud your standard investor looking to trade stocks with e.g. Robinhood than any major players.
So don't feel bad or think you have missed out. If you want to defraud someone go sell NFTs, those are literally nonsense sold to idiots...
By "this" I don't mean the earlier bits of the FTX debacle, but specifically this draining event. The statement that "FTX apps are malware" is weird in that it implies they became malware a while back. I could see either hackers penetrating due to inadequate security, or insiders setting up for an opportune time. Until the crypto is tumbled, it will be possible to trace its movements. Perhaps it'll just get frozen somewhere to keep it inaccessible by FTX interests. Let's see how long it takes to determine and locate any suspects for this. I have no guess aa to that, but watching with interest.
Who says the Binance app won't turn into a threat at some point?
At least that’s how I think of it, speculation creates nothing new. Instead it depletes resources that could have otherwise been used on something more meaningful.
I built a little tool that tracks the transaction networks of several top tokens.
If anything: Highly entertaining, I see a LOT of weird stuff.
It's called Pudding (because that's where the proof is) at https://alexisrondeau.me/pudding/
You know, absolutely fundamental questions that have never been asked or answered of crypto. Questions that were "presumed answered" by made-up market capitalisations, and the flood of teenagers and young-adults into the schemes.
"This time" is never different. The route to making a sustainable profit never changes.
I don't think this will affect its reputation noticeably.
Which demographic is going to be turned off by this?
The regular public won't hear about this. the FIRE investor people basically seem to use a percentage as a lottery ticket. Wall Street I would hope already saw the consistent story.
Is it hard core blockchain people, who knew of all the other crashed parties, but thought surely that's all behind us for the big players, having grown up now? But then nothing seems to faze them.
Maybe the whales who don't actually care about blockchain, but were sold angel investor status? Yeah, possibly.
There were so many similar sagas in crypto, that this is not surprising at all by now.
Additionally, if you hack a crypto exchange it isn't clear that law enforcement will be all that interested. If you steal from a bank, or from the people who've made deposits at that bank, it's a different story.
Lastly there's an infrastructure of coin laundries to facilitate crypto heists that's accessible to everyone, but in "tradfi" that infrastructure either doesn't exist or isn't generally available.
Cryptographic currencies are not credit, they are the gold. They are what gold would be if it were easily divisible and could be transferred anywhere, instantly, for only several cents worth of transaction fees.
Despite how quickly you can transfer cryptocurrencies, you could secure it as well as you physically secure gold if you really wanted to. The problem is that there are a bunch of businesses who are holding peoples' gold for them in such a way that bidirectional channels exist between front-end machines and back-end machines that have the private keys on them, and there is no regulation instructing these wannabe banks to perform cryptographic signatures on airgapped machines. It is as if Fort Knox were just leaving all of its entrances open.
Some many opportunities from pre-mined shit coins to ICOs and so on.
The promise of cryptographic currency was that we have the power. These exchanges by design sap that power for a promise that now seems illusionary at best and a massive liability at worst.
FINRA and the SEC need to charge Fried and his executive team immediately and begin the process of tearing apart that exchange.
As usual, we don’t. The question is, do you want the power to be in a condo in the Bahamas or in a building with the company’s logo on it, within walking distance of the SEC and SDNY?
On October 31, 2011, MF Global executives admitted that transfer of $700 million from customer accounts to the broker-dealer and a loan of $175 million in customer funds to MF Global's U.K. subsidiary to cover (or mask) liquidity shortfalls at the company occurred on October 28, 2011.
I don't think anyone has ever claimed that financial malfeasance is impossible in traditional banking entities.
> In January 2013, a judge approved a settlement that would return 93 percent of customers' investments, with the prospect of additional payouts from the company's general estate.
Plus, obviously, people who can find a random Bahamas native to KYC their account for them.
Like is this a psyop to destroy crypto? Is this preferential treatment of SBF due to his donations/regulatory capture? Imagine if there was a mass shooter in a crowd of people and they just let him continue firing until he ran out of ammo, that's analogous to what's happening right now. Absolutely insane.
Why would the government get their hands dirty when crypto can self-implode on its own.
SBF used to have intercourse with the Alameda CEO, and if I'm not mistaken they were all in this together (FTX + Alameda, that is). Article on the intercourse thing [1]. The admins of this forum can complain about "the level of discussion getting low" as much as they want, but this is the reality, this is how billions of dollars have been stolen.
[1] https://www.coindesk.com/business/2022/11/10/bankman-frieds-...
"I hold the private key to refund 80% of my victims losses, reduce my sentence or it dies with me."
He would go to jail. This isn’t even a tough one.
>According to on-chain data, various Ethereum tokens as well as Solana and Binance Smart Chain tokens exited FTX's official wallets and moved to decentralized exchanges like 1inch. Both FTX and FTX US appear to be affected."
Can someone say what the significance of moving these tokens to a decentralized exchange is? I'm guessing there's a strategic reason for doing so. Can someone explain what that it is if so?
Can iOS/Android apps be updated without 3rd party approval?
An analysis of the app update showed it disabling user features like account transfers. That makes sense for their bankruptcy steps.
the math works out for someone to spend it here given the amount of panicky crypto whales trying to get their money out of ftx. (OTOH, the math also suggest that these exchanges should've been hacked long long ago if these cheap zero days exist, so idk)
For apps to be compromised, that means a dev was involved, either knowingly or unknowingly. And as a dev, that unknowing part would be very hard, way more difficult when dealing with an app that handles so-called financial transactions. If something got in unaudited, that's also on the devs.
"letssavecrypto.eth" to the FTX Drainer address?
Seen here: https://etherscan.io/address/0xaa16547cdc32268542145d3401120...
My guess is its a way to communicate a message via txn data.
https://etherscan.io/tx/0x6bdd6c7d90c7f67223f7971745d5bc1f7b...
Text in utf-8:
Check out Fringe Finance, fully decentralised/non custodial platform. It's very very important to support projects like Fringe if we don't want events like FTX to repeat. Do check :- https://www.coingecko.com/en/coins/fringe-finance Problem won't solve just by creating Fck FTX Token. We need to support Fully Decentralised and Non Custodial platform Fringe at any cost. Lend/Borrow/Stake/LP/Stable Coin/Collaterals etc etc Team has been burning midnight oil, putting their blood and sweat into this. Check website, Read mediums. This project can end centralised scams for ever. Let's save crypto and pledge no one ever gets burnt again. Support Decentralisation, Support Hardwork, Support Fringe Finance.
Reality: contagion will spread next week and everything will probably crash, even if DeFi remains unaffected.
It crashes when they lose control, as they did earlier in the year. But at this point I don’t believe there’s enough riding on FTX that they’ve lost control again.
FTX is a story of retail and normies getting rinsed. But that’s zero sum. Who do you think ended up on the other side of the equation? Those people are in a decent position.
I did forget to wrap my doorknobs in tinfoil today so maybe I'm just not thinking straight
They’re gonna get this fucker.
Apparently he even had a custom client built that wouldn't trigger auditing.
It never ceases to amaze that this story happens again and again.
What is it about inflationary and socialist Argentina that would attract a cryptocurrency capitalist con artist? Do they have no extradition treaty?
[1] https://www.state.gov/wp-content/uploads/2019/02/12866-Argen...
a. Bankman-Fried and associates
b. insiders (disgruntled)
c. outsiders (hackers)
2. Is it plausible that the transferred funds be laundered?
3. Can this altruism get any more effective?
This story is utterly fascinating. It keeps getting better and better. I remember thinking Mt. Gox was wild. This fraud is second only to Ponzi.
I’ve also heard rumors that inside bad actors pushed out a forced FTX app update to gain access to accounts. So the advisory is to uninstall FTX and not go anywhere near that website. Any money one has is unfortunately gone, wait for the bankruptcy proceedings to recoup it, if at all.
If it's an inside job with this capability you'd likely already have such access?
Only way is that somebody has access to push this, doesn't have access to the keys, and rewrites the app to send them assets or something. But the mass withdrawals imply the keys are compromised, and pushing the app would very unquestionably imply you?
It's quite strange that a bad update was pushed at all since it implies that the bad actor doesn't have key access, but everything else they do does.
My best guess is simple key exfiltration?
Imagine throwing a life like that and he's barely turned 30. Hubris and foolishness can lead to one's own grave.
edit: I'm not wishing for his death. That's not what my comment was about. More on the psychological impact of deception at this magnitude and could any person cope with that.
https://news.ycombinator.com/newsguidelines.html
Edit: I'm surprised at how many people are eager to go there:
https://news.ycombinator.com/item?id=33570385
https://news.ycombinator.com/item?id=33570266
https://news.ycombinator.com/item?id=33570205
That is not what HN is for, so please don't.
I'm aghast at the magnitude of his disastrous actions and wondering how could someone cope with the situation he put himself in, from a psychological point of view.
If the FTX hack is true, then all that KYC info will be sold in the black market.
Regulation didn't prevent the hack (or rug-pull?). Self-custody with DeFi does prevent it.
It's shocking how some people are for tinkering hardware/software and self-hosting services like Nextcloud, but it comes to money they would rather leave their life savings with a third party (a bank or a custodial exchange) and renounce to all financial privacy.
The reason people are comfortable tinkering with hardware and software is that it involves little to no risk. The stakes are extremely low.
When a crypto exchange or a crypto wallet gets robbed, you have nowhere to go to get your money back.
There are good reasons why we don't keep large amounts of cash in our pockets or in our mattresses.
To me the crypto version is better TBH, which would force either private insurance or none at all. Believe it or not you can buy private insurance for crypto, which would achieve something like FDIC.
Do you have some data for this statement? (in the US, post FDIC deposit era)
Because even when a bank fails, there is usually more than enough to cover depositors, and what the FDIC does is arrange for the bank to be taken over by a healthy bank, with the deposits migrated (but equity and bondholders can take a bath). E.g. no depositor lost a penny in the financial crisis of 2008 -- which was the biggest financial crisis since the Great Depression -- even if they had money in excess of the limits. However it's quite unusual to have money in excess of the limit -- if you have that much, you wont keep it as a deposit, you'll hold some government guaranteed bonds like agencies or treasuries. It is extremely poor cash management for an individual to have more than 200K in a demand deposit account when they can be earning more with government guaranteed bonds that are just as liquid as cash. You can even open an account with Treasury Direct.
No depositor has lost a penny in an FDIC insured account (even with total balances above the insurance limit) ever since the FDIC has existed.
Even a single example would do.
The giving of now-gone money to the depositors is inflationary.
The fallacy of your above statement is you're considering the system of 'fail, then FDIC pays out depositors' when in fact the alternative is 'fail, depositors eat losses'. The former is inflationary relative to the latter, and in fact punitive to those who chose banks that didn't fail. The net difference between the two is the discussed inflationary event 'FDIC pays out depositors.'
Though the US could've used more inflation at any point up to 2021 considering our inability to ever get unemployment low enough. (since they're theoretically more or less directly related)
What matters is where the old funds went. The bank might’ve been spending it out the back, but in that case the inflationary actions already happened.
> FTX partners with Stripe to ensure a secure identity verification process. Please note data will be stored and may be used according to the Stripe and FTX privacy policies.
https://help.ftx.com/hc/en-us/articles/360027668192-Individu...
This is AML. It has nothing to do with protecting client funds.
Though knowing FTX, they might have advertised compliance with "Employees must wash hands" as "We are a fully reglulated exchange complying with all applicable local and national laws"
From a secure and audited system where only a handful of people had access and the actions of each are recorded (if we dismiss Bankman's "backdoor" for a moment), all of a sudden we have a system that was wide open to the world and raided exactly after the financial collapse. As it's easy to see, your Honor, the hackers were in the system all along, forging the so called audit trail allegedly incriminating my client; when the game was up, they pounced.
But yeah it became apparent a while back that some very bad actors, speculators, had become involved in crypto, so I became inactive.
One to two billion is missing and probably stolen.
Source: https://twitter.com/minigrogu/status/1591104167455510529
If an exec can just go and cook the books, or like sbf did, "secretly transfer 4bn to alameda", it doesn't matter if you have strict auditors. It doesn't matter if you have compliance and control rules around comingling. This will literally never be visible to anyone in your exchange since their data source is fundamentally wrong.
Nothing they did was proper or legal in the first place! It's already quite regulated in that regard. But they were able to do so in the first place since the required compliance frameworks weren't completely in place.
"Not your keys, not your coins"
Edit: It is rumored that SBF is en-route to Argentina
Second Edit: This is a Twitter rumor, with no verification, could be fake news. I was going to paste the Tweet, but the Tweet has been removed because it was seen as unlikely.
Also worth noting, due to a quirk in the way Argentina citizenship laws are written once he is in the country he can file immediately for citizenship and he won't be deportable (although he will be extraditable). I'm not an attorney but that may help him in case his passport is revoked.
FTX seems like it’s still trying to steal funds
*Madoff confessed to his family, said he would turn himself in, and asked for 24 hours to get affairs in order. Family refused, called FBI immediately
Many of Madoff's victims exaggerated their loses. If they invested $1MM at a claimed return of 15% for 6 years, they would claim they lost $2MM, not the $1MM principal.
(I just hope our Government doesn't try to bail out crypto speculators!)
To be fair there’s something to that idea. Market returns about 7% on average. Over six years that would be an opportunity cost of 50%.
But, as you say there’s got to be some loss for choosing to put one’s money with a con artist
I doubt there will be a crypto bailout as it seemingly didn’t get big enough to blow up anything outside itself. It also had an anti public relations campaign for years
I must admit, I don't have a lot of sympathy for Madoff's victims. Especially the charities! If I donate money to a charity, I'd expect the money to go to help people or to further their cause -- not to be invested in a high-risk ponzi scheme.
> In 1992, Bernard Madoff explained his purported strategy to The Wall Street Journal. He said his returns were really nothing special, given that the Standard & Poors 500-stock index generated an average annual return of 16.3% between November 1982 and November 1992. "I would be surprised if anybody thought that matching the S&P over 10 years was anything outstanding." The majority of money managers actually trailed the S&P 500 during the 1980s.
From https://en.m.wikipedia.org/wiki/Madoff_investment_scandal
If politicians wanted to make crypto bros whole, I would lose my mind. I doubt I am the only one, and I would hope that would be scene as a political death sentence to endorse such a proposition.
https://www.bizjournals.com/sanjose/stories/2001/07/30/daily...
(I was opposed to this. I purposely didn't exercise stock options that I couldn't or wouldn't sell immediately because I knew about the tax liability. I don't believe the defense that someone who wants to speculate in stock options just didn't know about the taxes. People who wish to speculate with complicated forms of investors should be prepared to take all the risk.)
[1]https://digitalcommons.wcl.american.edu/cgi/viewcontent.cgi?...
Did you maybe forgot to mention that those people were Israeli citizens?
How is that relevant?
SBF isn’t an Israeli citizen, is he?
And the people being hurt are more than educated about the risks they take.
"In contrast, Russian cryptobros that I know tend to act very, very lowkey. The fewer people know about your activities, the better. Posting about dealing with crypto in social media is absolutely unthinkable. Why? Because that makes you too easy and lucrative prey"
That thread describes how a basement was found, in the house of an official in the Russian prison system, which appears to have been specifically designed for the capture and torture of crypto owners to give up their coins. It had its own crematorium for disposing of the remains.
If these guys think that they can take some coins and live a nice life in a place without strong rule of law, they have a nasty surprise waiting for them
For all we know it was used to torture political enemies with maybe the odd crypto bro on the side.
This doesn't fit the profile of political enemies very well. 1) political enemies commit political acts, which can be extorted but not normally after you are dead. Crypto still works after you are dead 2) each political enemy would stand in a slightly different relation or context to you, which suggests a bespoke approach not a system. Crypto owners can all be processed in the same way
> 5. That may explain why Russian army and the military equipment are so archaic btw. In order to create something new, e.g. drones you normally need non-violent entrepreneurs who would actually create stuff. In Russia they're being wiped out by the violent ones. Hence, no drones
Iran has drones. Does that mean Iran is an example of "an artificial, abnormal environment which selected out the violent entrepreneurs, allowing the non-violent ones to flourish"?
The more well attested point is that crypto owners in Russia don't advertise the fact, for fear of something like this.
Argentina is an... interesting choice, and I'm sure he'll adapt just fine to the place and the bureaucracy and also there's no guarantee that's a safe haven in any way.
Edit: flight is showing as n.1 being tracked worldwide
Or maybe Black Cube.
TBH if you look at the data the US doesn't extradite that liberally. Even the Liberian torturer son of Charles Taylor or whatever was safe in the Caribbean despite being extraditable; as long as you didn't commit murder or do something big on the public radar or make political enemies or steal too much money I get the impression the US government doesn't try too hard. But they will definitely try to extradite this fella.
It’s absurd that anyone is still giving crypto anything but derision.
It’s like someone posted a flat earth website and dang is like “hey let’s hear them out”.
Forget about it.
Three clear and obvious outcomes of this unwinding:
1. The crypto mantra "not your keys, not your coins" rings true.
2. Entrusting your personal financial data with a private company is sure to end in disaster, either by hack or court order. Privacy should be a basic and legally protected feature of blockchains.
3. Centralized Finance or CeFi is mostly a sham and deserves to be heavily regulated. Not to be confused with on-chain and transparent Decentralized Finance or DeFi platforms like Aave that have behaved predictably through this downturn, and have never required KYC.
https://news.ycombinator.com/item?id=33153865
We haven’t seen privacy and KYC be an issue yet with FTX but data breach could be next after the money goes.
Until crypto has a workable solution to this that doesn't rely on me keeping paper copies of my master key in a safe, it's not really viable for the masses without exchanges like coinbase and co.
> Entrusting your personal financial data with a private company is sure to end in disaster, either by hack or court order
Hard disagree here. In all my years of interacting with private companies they have always protected my money, even when it was taken from me fraudulently.
> Centralized Finance or CeFi is mostly a sham and deserves to be heavily regulated.
I dunno, cefi works pretty well for me.
Of course the difference is that the cefi institutes and private companies are regulated traditional banks.
> Privacy should be a basic and legally protected feature of blockchains.
For a decentralised system that touts it's benefits as not being tamperable, a legal protection is worthless. If we require legal protections for blockchains what value does that prove over a centralised regulated system? Also, as it's decentralised and privacy focused there's nothing stopping someone in a country with a different interpretation of "legal protection" being involved.
>We haven’t seen privacy and KYC be an issue yet
We absolutely have, with AML checks. Try cashing out 100k of crypto and using it as a deposit for a mortgage with a bank or lender, and see how open to it they are. This has been the case for at least 3-4 years here in the UK.
> In all my years of interacting with private companies they have always protected my money, even when it was taken from me fraudulently.
I was talking about data. On a long enough timeline, all financial services holding user data will be vulnerable to a breach. Money maybe also vulnerable but less so if regulated, I guess you are lucky to be interacting with regulated exchanges.
> If we require legal protections for blockchains what value does that prove over a centralised regulated system?
Regulate the companies, like Celsius and FTX. Users can use these on and off ramps into blockchain with more regulatory oversight and assurances their assets won’t be leveraged without their consent.
Your last point seems like misunderstanding. I say we haven’t yet seen FTX user data and privacy be breached.