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Comment by YossarianFrPrez | Hacker News Reader

Regardless of whether you are pro- or anti- crypto, the collapse of FTX, SBF's bubble bursting in a rather extreme fashion, and now this hack are more nails in the coffin for mainstream support.

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.

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1. Crypto and web3 is so tarnished in consumer minds, it cannot recover. The next big thing in this space needs stay away from those terms like the plague.

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.

Trust is oil that makes economic engines fast and abundant, while distrust is sand - even a few specks cause damage. Trust between actors is key here, not just trust that the system won’t malfunction. The next iteration has to make every participant as safe as can be (without raising the threshold for entry).

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.

1) To recover, a crypto will probably need to include specs about how the exchange should run.

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.

Like a normal exchange, audited and run by professionals not crypto bros. A walled depository, like a normal exchange. Running within a reputable regulatory framework. Nothing new here.

So, the only service you really need is something like Tether, not an exchange (as you can use decentralized exchanges). The service Tether operates--and I'm not claiming they aren't also some horrible scam, but I'm using them as the example because they are seemingly the minimal thing you need--is to act as the connection between fiat banks and decentralized chains, by supporting wire/ACH on one side and issuing a token on the other side (which they will later accept back for money). You don't need crazy complicated exchanges with their massive attack surface: you just need Tether. Now, is it possible to have a transparent Tether that you reasonably trust to be legitimate? I don't know. Maybe that's Circle--the people who do USDC, and which have been managing to compete with Tether for the most used stablecoin as of this year--as they do regular SEC filings and have fancy accounting reports? Alternatively, maybe if some large existing bank--such as Bank of America--were willing to issue a stablecoin, we'd all be willing to trust it to not be corrupt? But you really, honestly, don't need a full-blown centralized exchange for crypto to work: you just need a working stablecoin with enough easy-to-access liquidity that you can quickly buy in and out with a ton of money.

All of this is a solved problem in equity exchanges world. Escrows, SPIC etc. No need to reinvent a wheel that was invented after learning from so much of pain.

So regulators either come down heavily on these exchanges or they will let retailers continue to get conned.

Its a solved problem in crypto too. Shapeshift allowed for swapping of funds while always having control of the keys, but it was given hell by regulators. If it were allowed to grow maybe things like ftx wouldnt have gotten so big

A DEX

https://particl.news/introducing-particls-basicswap-dex/

About #1 I think you are wrong. History has shown us that all they need to forget it is a few days of green numbers again. The siren song of a few days of up only.

I think the bigger damage is done to the institutional investors. They might have been able to ignore historic collapses of exchanges as the sort of thing that happens when a promising new asset class is dominated by amateurs that originally wanting to trade playing cards, not sophisticated professionals like them. But SBF was supposed to be the adult in the room, an ex-Jane Street trader focused on providing liquidity who wanted the market to be better regulated...

"Web3" was never mainstream, despite the obvious manipulations to try to make it so.

It was headline on Singapore FinTech Festival in 2021. I hope the organisers have warm ears now.

All reasonable points, and potentially insurmountable challenges. Also whatever it is, needs to have incremental utility, otherwise there's no road from the present to the future for it.

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.

You can build whatever language features you want, though it still should deploy into the EVM. Vyper is an existing alternative to Solidity.

I would like to see more alternatives, so stop ranting and start building.

https://www.quicknode.com/guides/smart-contract-development/...

Observing that you can implement any semantics atop a turing complete mechanism isn't interesting. You're also ignoring the very interesting possibility of using a total language.

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.

I pointed out that Vyper is an alternative to Solidity which already is available, and that any language can be created to run in the EVM. I would even like to see a subset of COBOL ported to the EVM with an eye toward simple security constructs. Am curious what specific shortcomings you found in Vyper.

1. Remember ICOs? Web3, NFTs, and DAOs are going to be this cycles ICOs. The word crypto isn’t going away, but everything else might.

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.

I have never understood what problems crypto/Blockchain/web3 is actually supposed to solve. I know it gained traction during the Libertarian/Austrian economics zeitgeist following the 2008 financial collapse. There was fear that the traditional fiat system was irreparably broken and couldn't be relied on. In reality regulators and central bankers did a pretty solid job (not perfect but they eventually got it right). DeFi was basically saying regulation is impossible to do without corruption so let's make transactions possible and regulation impossible. Not a great idea and now a fully failed experiment. Crypto as an asset class for profit was only ever an emergent property fueled by speculators. Crypto as actual currency is still valuable (mostly for criminals) so it may stay for a while but it's not going to make anyone rich ever again.

One important feature for me is that nobody can take my coins from my wallet. Putting coins into an exchange or JPMorgan is not what I mean.

A less-discussed effect here is that crypto sketchiness crowds out legitimate applications. If someone has a problem that crypto is actually a good fit for -- an application that would legitimately deliver value for customers, insuring medical tourism perhaps -- a lot of people will dismiss it just because they assume crypto=scam.

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 someone has a problem that crypto is actually a good fit for -- an application that would legitimately deliver value for customers, insuring medical tourism perhaps -- a lot of people will dismiss it just because they assume crypto=scam.

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.

Fair point, however I think the argument ultimately still holds. If customers or regulators learn that the application is crypto-powered under the hood, they'll be turned off. And it might be that the crypto part can't be stuffed under the hood.

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.

> It sucks that people put their faith in tech geeks like me, and they got let down.

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.

>Well, not like you since you’re genuinely trying to solve real-world problems.

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.

RAI works exactly as promised. The problem is that it is not a ponzi scheme. RAI is a cryptocurrency that basically implemented Milton Friedman's idea of replacing the federal reserve with a computer.

Past crypto bubbles reinflated primarily because everyone had too much cash and interest rates were falling for decades. Even smart money had nowhere to go.

We may not see an environment like that for the rest of our lives.

This isn't a crypto failure. Crypto works.

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.

> This is a human failure

Is there any crypto out there without humans ?

Is there an undo button to reverse the transaction?

All financial systems involve humans

> Is there any crypto out there without 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.

What foogazi was perhaps suggesting is that no financial system can work if it doesn't account for fundamental human behavior - we make mistakes and we are greedy if not held accountable "off chain".

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.

Then what is the future? Certainly not the government going haywire with the printer. It’s impossible to trustlessly verify the exact number of US dollars in circulation, but it’s trivial to do with cryptocurrencies.

Removing the possibility for human intervention doesn't make things more resilient quite the contrary. Removing human control of public policies, such as those involving the management of public resources, is downright anti-democratic and dumb. If you people intend to build a monetary system, you need to educate yourselves about monetary systems. The money supply must be managed (i.e. inflated and deflated in your unconventional parlance) in order to keep prices stable. An currency in which prices are not stable will never be used as currency by businesses because it would put them in danger of going out business due to price swings. Restricting the issuance of currency doesn't make the supply of such currency fixed. Look up how money is created by the banking system. Only a small part of the money supply is money created by central banks.

The money supply managed by an on-chain protocol where it’s fully open, trustless, and predictable is 100% times better then a small group of people at the treasury deciding to print money and inflate peoples savings always.

> is 100% times better

I think this says it all.

There is the same undo button that exists for every other financial institution that commits fraud: lawsuits.

And if you can't find the person to sue because the person is an anoymous hacker? With fiat the court will tell the banks to reverse the transactions.

That isn’t the case here. Anyway, people get defrauded through banks all the time with advance fee fraud, 419, and other scams and banks don’t reverse those.

>That isn’t the case here.

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...

If someone sends physical cash to a person across the world, is there an undo button?

* People rarely deal with large amounts physical cash. They deal with abstractions built upon cash (checks, credit cards, ACH, other electronic transfers).

* 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.

Spot on. Money is a social construct after all and thus subject to human fallacy.

> it should be regulated like a bank

And how would they implement KYC/AML regulations which are fundamental to banking ?

By force, if necessary.

No technically. There are seemingly endless ways to move funds anonymously.

There's endless ways to move cash.

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.

Dealing with large volumes of cash is very difficult.

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.

I agree that the algorithms powering crypto are sophisticated pieces of technology. Just look at the zero-knowledge proofs.

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.)

A CEX is "like a bank" because it's a human that takes custody of assets, not because it does trades and loans. Smart Contracts, however, can't be regulated the same way that human custodians can, but they are also designed not to be able to do unexpected things.

There have been plenty of examples of Smart Contracts doing unexpected things because all of the myriad of edge cases were not anticipated for.

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.

I don't really have a dog in either kennel, but something about the idea that a human absolutely must be in the control loop for a currency to work feels... not wrong, but maybe "not wrong so far".

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.

If there were a clear and well-regulated equivalent of Tether, with obvious and transparent dollar-backing, I suspect it would find a lot of usage.

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.

Right now stablecoins are a pretty profitable business because of interest rates.

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.

> If there were a clear and well-regulated equivalent of Tether, with obvious and transparent dollar-backing

There are several. I compiled a list of them a few months ago.

https://news.ycombinator.com/item?id=31381864

So bank regulation worked in 2008, is was just a human failure?

Communism works, it's just human failures?

The measure of whether something works is whether it prevents human failure.

You forgot:

Regulation works but it was just human failure:

https://en.wikipedia.org/wiki/MF_Global

Socialism to some extent has been successful in some countries. Sweden is a good example.

I agree with your statement, perhaps with a very loose sense of “socialism to some extent”.

However, socialism is not communism, which is what the GP comment mentioned.

No it isn't. Pretty sure that they have a lot of private entities owning the means of production in a free(ish) market, and not mostly the government ?

We had gotten rid of bank regulation, which caused 2008.

https://www.federalreservehistory.org/essays/glass-steagall-....

Pretty US centric view.

Banks in other countries were affected too, despite regulations.

All crypto currencies are a ponzi scheme. Change my mind.

Ponzi schemes by definition use opaque ledgers. Ponzi schemes are custodial. Ponzi schemes guarantee returns.

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.

> Ponzi schemes by definition use opaque ledgers.

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.

Ponzi victims are told on paper that their "investments" are increasing in value, and that they can withdraw at any time, when in reality, the assets don't actually exist. Also a key aspect is that their balance only ever goes up.

your definition includes stocks. I suppose you might be right that stocks are a ponzi

they weren't back when the reason people bought them were dividends, now the only real exit is if the company goes bankrupt or is purchased. The intervening time is hard to describe as anything other than pure speculation and piling dupes on top of each other

Your definition covers every investable asset.

In a ponzi scheme, there is a fictitious business model that's purported to be turning a profit, and its lack of profit is hidden by secretly using new inflows to pay off old investors.

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.

"It can't be a Ponzi because they're honest about it being a scam right up front"

That's how the definition works, yes.

By the way, who is the "they" that your sentence refers to?

well you have to draw a line somewhere. Call it something else if you want to criticize it. Like a bunch of fools racing towards a cliff.

But if they're honest about something being a scam how can it be a scam? Seems like a paradox.

Literally only a paradox in places like Hacker News by people who are motivated to question calling crypto a Ponzi.

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.

Do you consider social security, or for that matter all government tax and welfare systems which depend on growth via immigration to be ponzi schemes too?

Why do you believe it is bad news to me? It's just semantics.

> It is still a Ponzi if people are "honest" about it being a Ponzi

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.

Cite that definition.

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.

> A Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. Named after Italian businessman Charles Ponzi, the scheme leads victims to believe that profits are coming from legitimate business activity (e.g., product sales or successful investments), and they remain unaware that other investors are the source of funds.

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?

> From your tone it seems like you think I'm trying to defend crypto in this thread.

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.

I've noticed this phenomenon a lot, and I'm not exactly sure what causes it. If you correct someone's understanding of the software, half the time they'll try to pick a fight with you over being a supporter of it. I haven't experienced that while discussing any other type of software project.

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.

Saying it’s not a Ponzi doesn’t mean everfree is defending it, it’s just useful to have precise definitions about these things.

Do you know what a Ponzi scheme is?

Take a look at RAI.

People keep saying this, but I don't follow. FTT was a token manufactured out of thin air. Crypto works as a concept, I suppose, but people saying crypto works is like the people that say Agile works. How long do we have to wait to see crypto working? Where are the success stories of crypto? There's a long laundry list of hacks, scams, company failures, "tokenomics", NFTs, <x> on blockchain, etc. Saying crypto works as a technology base is not enough. Currencies and tradeable "assets" are a social thing. It isn't just a technology.

Lumping diagonally opposed things (centralized coins like FTT or decentralized coins like BTC) under the same category (crypto) is quite misleading.

> How long do we have to wait to see crypto working?

BTC (on chain) is still working as intended, after all these years.

> Lumping diagonally opposed things (centralized coins like FTT or decentralized coins like BTC) under the same category (crypto) is quite misleading.

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?

> 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 ...

Bitcoin fees are often not cheap at all.

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

You need to start backing up your statements with facts. Please show us that bitcoin fees are "often not" cheap 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.

Sources? I was buying and transferring bitcoins over 8 years as I bought weed through it.

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.

That's not a source.

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.

> Sending crypto to someone in Iran or Russia is against the law independent of how you do it.

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...

It's an interesting level of abstraction question. On a fine-grained level, yes, BTC works algorithmically as you have pointed out, and FFT is not the exact same thing as BTC. The question the is whether either of these things work socially / for society.

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.

The creation, distribution and governance are completely different. The public may not care but in the long run we mow see it matters.

To support my point:

https://mobile.twitter.com/whale_alert/status/15916165982801...

This doesn’t happen with BTC because it wasn’t created out of thin air.

> BTC (on chain) is still working as intended, after all these years.

It's certainly working on destroying the planet with its obscene energy requirements.

I am not a fan of "destroying the planet" arguments mainly because anything goes, super ambiguious and not very precise. Buy our razors because cartridge razors are destroying the planet! https://bandisposablerazors.org/

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

On top of being hard to argue against, it just isn't true. It's a net positive for the environment, at least it will be in a couple of years: https://batcoinz.com/50-landfills-mining-bitcoin-a-zero-emis...

Generally though, conceptually the argument goes like this "You can't do X because it destroys the planet. Since we cannot destroy the planet, there is no other option but to accept banning of X". But, there is no limits or guards to this. You can easily go down the slippery slope and say X is the city of Chicago that needs to be destroyed for the collective good. It consumes too many resources.

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.

is this paper saying that Bitcoin _will_ all be mined using methane, or that it _could_? because those are two vastly different conclusions.

I don't believe it's saying either. It's saying that the trend is towards net zero emission and that this will happen by the end of 2024. After that I would assume we go into the negatives and improve the current situation.

"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."

So… we will solve global warming by running a network of computers with custom ASICs at 100% utilization, cooling them as necessary, performing useless computation, so a cabal of technobros can move imaginary internet money around 10 times per second?

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???

No, I've never claimed that. Regardless of what you think about Bitcoin, if it's useless or not, don't you agree that net negative is better than zero?

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.

I would agree that not performing useless computations is better than performing useless computations. If monetary incentives are all we need, then just use tax incentives to do so. That seems much easier than shipping mining rigs and the corresponding cooling to locations apparently too far from civilization to produce energy for anything useful.

A tax would result in a cost for the business.

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.

A tax incentive, as in an offset on their costs.

Sure, so we just move the cost to someone else effectively? Seems unfair and unnecessary when they can just mine bitcoin instead.

This is wrong and green washing.

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.

No, this is not wrong. You can't magically just "use it for something else". That's not how this works. You need to generate electricity where it is needed (or transport it, which costs money).

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.

Aren't landfills close to civilization usually, so it would not be hard to transfer the electricity some miles to charge Teslas, heat homes or power etc.

Where are landfills too remote to transport electricity away from?

I'm sure that's the case for some of the landfills, but definitely not all of them.

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.

The profit is too small.

Easy to solve with laws. Shouldn't be allowed anyway to just pick the good things from a gas field...

Yeah, let's use laws instead of something that makes monetary sense...?

It's not a gas field, it's a land fill.

Just because it makes monetary sense doesn't mean it makes ecological sense. Therefore a law

Energy which was paid for. If there is a problem with that then price it accordingly.

Energy which is used to mindlessly calculate dumb hashes, trillions of which are discarded every second for the winning 'hash'. Proof of Work is basically lottery, but which consumes energy instead of tickets.

Not a miner. I do use a computer to calculate dumb stuff all the time for entertainment purposes.

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.

I'm not sure gamers have over-specced their gaming machines to the extent they're using more electricity than a medium-sized European country...

Are you suggesting the combined power usage of gamers specing their machines above average recommended system requirements is less than the power used by mining industry? I’m skeptical about that.

And its beside the point because again its none of your business.

> Are you suggesting the combined power usage of gamers specing their machines above average recommended system requirements is less than the power used by mining industry? I’m skeptical about that.

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?

Still skeptical and like I said I would not care if they do because it’s none of my business how they use the energy they pay for.

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.

Calculating hashes in a loop is dumb, cyberpunk is a pretty complex piece of code which also utilises GPU aspects like ray tracing,

> just to see some dumb frames on a screen that are discarded at a hundred per second.

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.

They are if the thing about the eye being limited to 60FPS is true.

Nobody has the power to unilaterally “set the price” of energy, it’s set by the market.

Free markets are great for a lot of things, but pricing in externalities isn’t one of them.

Agreed but I think people should be looking at power companies and how they generate energy for accountability instead of going for industry A and B. Wiping PoW from the face of the earth won’t make those coal plants in China go away.

No, but it will reduce the demand for what they produce. This isn’t hypothetical, even in the US there are examples of coal/natural gas plants getting brought back online for bitcoin mining (finger lakes NY; Hardin, MT)

Well, maybe I should raise the example of ETH instead. It is still working as intended, decentralized, and consuming little energy.

Given ETH only switched to proof-of-stake this year, I think perhaps it's a bit early to call it out as a long-standing energy efficiency success.

FTX is a centralized (not DeFi) exchange that used their own coin as collateral and obfuscated their liquidity. This wouldn’t be possible in open decentralized exchanges that many in web3/crypto were advocating for. However SBF made it his mission to lobby regulation on DeFi and a blind eye to CeFi exchanges like his own.

https://www.politico.com/newsletters/morning-money/2022/10/2...

> many in web3/crypto were advocating for.

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.

The wallets are speaking clearly, DeFi volume is through the roof right now.

https://defillama.com/dexs

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.

"If many people in this space are advocating for decentralized exchanges, how come everyone uses centralized ones?"

Convenience.

DeFi doesn't interface with fiat.

You just get a different set of tradeoff on a decentralized exchange. E.g. many users don't have the basic opsec required to protect their private key without losing it.

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.

>basic opsec required to protect their private key without losing it.

Exactly. I've long wondered if there's any way to overcome this without essentially going back to a 'trusted broker/custodian' model

This is what the entire cryptosphere always seems to miss - society. People have pitched cryptocurrency/blockchain/NFTs for all sorts of things, and every one is a pure tech solution that misses the social aspect.

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”

Its really a viewpoint common to tech workers. They see and solve the technological aspects of a problem while remaining blind to the larger more complex social aspects that remain unsolved, but think the problem is solved.

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.

If a bank gets hacked, generally the transactions get reversed. If a cryptocurrency exchange gets hacked, that generally can't be reversed.

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.

Who will be in charge of deciding which transactions need to be reversed and when? It seems to me that the ability to have reversible transactions is at odds with the descentralised nature of blockchains.

Tell that to the folks who forked Ethereum.

I agree with you. There doesn't seem to be a good way to allow transactions to be reversed while keeping decentralization.

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.

Indeed. Beyond the failure of human greed in the crypto Ponzi schemes, FTX is also a massive regulatory failure. These firms have been allowed to play with people’s money for too long.

I think the new laws and regulations are coming out as we speak. Since it's such a new area they have been slow. The SEC just hired a bunch of new people. They have been busy prosecuting people too.

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".

It's probably no accident that SBF made substantial donations to one of the major US political parties. And by substantial, I mean that party's second biggest donor in the '20-21 cycle.

Crypto works for what use case exactly? Crypto payments take much longer time than traditional credit card ones , are barely supported by most websites and in many cases cost more in transaction fees than credit cards.

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.

Perhaps for the use case of the underbanked, which is the majority of the world. That I need to wait for confirmation on the blockchain for a crypto payment is orders of magnitude faster than my other option, which is wait for someone to manually bring in foreign currencies by train. My country is not on SWIFT. My passport will not allow me to get a bank account in any country that would let me process credit cards. I am not allowed to use Paypal.

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.

I'm from India, one of the most populous countries in the world. And we have instant online transfers with no transaction fee and it's called UPI.

Is everyone in India banked? How do you transfer money outside of the India? Can you do that insta fly with UPI as well?

There are more countries than India, I’d suggest maybe taking a look at South America, Africa and Asia.

This argument always intrigued me. Once you point out cryptocurrencies don’t actually solve the unbanked problem for poor people, then the use case immediately shifts to “well have you tried to move seven figures between countries”?

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.

That's not what we were discussing. Here's your quote:

> 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?

> This isn't a crypto failure. Crypto works. This is a human failure.

"Guns don't kill people, people kill people."

A point no one who wants to ban guns would disagree with.

the edge here being that if a tool is powerful enough to take someone's head off, we should probably do something to mitigate the risk of folks using it.

This seems like a simplification. Crypto, like any currency, needs to be able to be easily converted to and from other currencies. I can walk up to thousands of money changers and exchange USD for Euros, Pounds, and plenty of small countries' currencies. Meanwhile it may be technically possible to do the same with crypto, virtually nobody is, and the places that do offer a conversion, like BTC ATMs, charge enormous fees.

The fraud going on in there was not human error. Reuters wrote about a backdoor sbf used to make transactions with ftx assets off the books, without alerting controls. If this is true, it’s oceans eleven stuff.

Bad user interfaces have caused catastrophes (see for example Three Miles Island or the Mont Saint Odile Airbus crash) that have also been labeled "human error", but those catastrophes wouldn't have happened without the bad UI.

as SBF himself allowed in the Bloomberg interview, this system only works if humans, driven by FOMO and greed, bid up the tokens. that, more than the technology underpinning the system, is a necessary condition for defi or centralized crypto to "work."

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.

The problem is the crypto community’s skepticism of proven financial safeguards. Large financial systems are centralized for a reason and they seem intent on finding out why by hitting every bump in the road at full speed.

Indeed. In a way it reminds me of how easy it is to be utopian if you ignore incentives.

What's amusing about your comment is that exchanges are the one centralized part of crypto due to the interfce with fiat and they also tend to be where all of the fraud occurs.

> exchanges are the one centralized part of crypto

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.

I believe 'centralization' here refers to centralized control. The ledger is distributed anyhow, so not very central.

> where all of the fraud occurs

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.

Yes, smart contracts can be programmed to allow terrible human behavior. Banks also have this feature.

But... they can also be programmed NOT to allow terrible human behavior. Banks do not have this feature.

Banks interact with the legal system at every level.

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.

Are you suggesting that KYC/AML protects consumers from the bank?

> But... they can also be programmed NOT to allow terrible human behavior.

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.

Banks actually do have terrible behavior if you think fractional reserve banking is a scam. If banks were not backed by the government printing press they would all collapse.

What's also interesting is that decision-making power is very rarely fully centralized in large financial companies. Boards of directors, fiduciary duties, third-party audits, attorneys, and so on, all structurally serve to decentralize decision making. There is, of course, individual variability, and such structures are not always successful.... E.g. I've read that the board of FTX wasn't an independent board in any meaningful sense.

> due to the interfce with fiat and they also tend to be where all of the fraud occurs.

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.

I use my airline miles before dollars when buying plane tickets. This does not mean I value airline miles over dollars.

To correct your comment a bit, fraud occurs much more on centralized human-run exchanges that do NOT handle fiat. Handling fiat => licenses => regulation => harder to do fraud and get away with it.

It did not seem to make it that much harder for FTX...

Pretty much everyone in the crypto community would be fine and happy if exchanges were forced to prove they own the users funds. Crypto people generally don't want crypto regulation. But exchanges are not crypto. They are a third party holding your crypto.

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.

Agree. You don’t need extra special “crypto” regulation to know that customer’s assets should not be stolen.

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.

This is a Wall Street corruption story.

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.

Very interesting take.

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/

From what I've gathered, Alameda lost the money during the Luna collapse back in the spring. Sam extended a loan from FTX (using customer funds) to Alameda (which he owned 90% of) to prevent Alameda from collapsing with everything else (Three Arrows Capital etc). When called out, he claimed on Twitter that he was just shuffling around some cold wallets. The balance sheet leak from last week handed observers a smoking gun showing that it was actually being loaned out to Alameda, triggering Binance to begin their exit, which kicked off the cascade of events.

> This is a Wall Street corruption story.

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.

> > This is a Wall Street corruption story.

>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?

(We should remember to be careful in the thread to stay substantive; dismissing your opponents claims as “Utter bull” may feel good to write, but the sentence after that is the valuable one for readers. Only you can prevent forest fires^W^Wflame wars.)

Dude, in a world of Lloyd Blankfeins, Kevin O'Leary is a small fish.

Blankfein is worth just over 2x Kevin O’Leary. They aren’t really categorically different.

Wiki was quiet about Caroline Ellison's family but a random post on the internet just happened by and the claim is her father is Glenn Ellison.

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.

Sbf gon get epsteined

Ellison was not GG's boss. GG taught in the B School; GE is in HASS.

> I’d highly surprised if it could be done algorithmically

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?

> nails in the coffin for mainstream support

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.

One of the biggest issues with Bitcoin as others have pointed out is the catch-22 of self custody. Another huge issue is offshore unregulated exchanges like FTX. The resolution is actually regulation that allows financial institutions like Banks to hold Bitcoin. Services like this already exist with companies such as Casa (keys[dot]casa) where you have a multi-signature wallet where one of the keys is held by them. The problem with Casa is that they cannot be FDIC insured. A 3 of 5 signature wallet can create a sliding scale of security vs ownership with the most security and most insurance being offered by the Bank where they hold 3 of the 5 keys. This may be attractive for people who want to own a little bit but not take on the risk. Banks may even do the purchase for you as well (for a fee of course). For those who say this is just the current system with different steps, the difference is the possibility of taking on 100% of the risk/ownership yourself. Just the possibility of that shifts the power dynamic in the clients favor. Additionally, once institutions get legal clarity, they can also start running their own lightning nodes which generate revenue in the form of fees. Since they will hold large amount of BTC reserves, they can compete for more traffic. More traffic equals more fees. And no, I am not saying lightning is in a place right now where this would happen; but what is today isn't what will be tomorrow. This is just conjecture obviously. Once such things are in the hands of such institutions (as well as an approved spot ETF in the US) then the narrative on MSM will shift (dear public, it is safe to play in this space now). IMO I believe that is is the actual reason as to why there has not been any regulatory clarity on BTC.

This isn't crypto. This is a centralized exchange with a centralized website, with centralized databases, that is run and controlled by humans. In fact, if you use a centralized exchange there is no use of blockchain for the most part.

There's a literal saying, "Not your keys, not your coins". Only if people would listen.

> There's a literal saying, "Not your keys, not your coins".

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".

Yes, it does, but some of us actually consider this to be a feature.

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.

To be clear, "crypto" is just a book that says these individuals own however many tokens. It doesn't guarantee that anyone will abide by what the books says. It doesn't guarantee that nobody will take your real wealth from you by force.

In what way is crypto an insurance there? Typically, ruthless regimes are good at separating you from your assets. I don't see any of the typical methods not working with crypto. It's really only an insurance against marginally bad situations and there lots of other things work equally well.

Crypto obviously has its disadvantages, hacks being one. There could be major UX improvements to crypto that would aid in reducing hacks and increasing security.

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.

The exchange is a component of crypto, as an industry. Imagine defending social media but shitting on Facebook. To use your words to try and make your argument:

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.

> Imagine defending social media but shitting on Facebook.

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.

Mastodon isn't an argument that social media isn't terrible.

The same argument can't be made for crypto exchanges and the industry they occupy also being terrible.

You're right that a lot of the risks are due to holding in a central website. But cryptocurrency in a central website is more risky than fiat in a central website, because if a central website gets hacked and the hackers steal fiat, generally those transactions will be reversed, whereas if the hackers steal cryptocurrency, generally those can't be reversed.

What do you mean by stealing fiat currency from a central website? How would a website custody fiat?

Paypal?

I do an electronic transfer from bank A to bank B. I have a balance in bank B. Bank B then gets hacked.

Is it?

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.

From the guy that did "FTX bankruptcy explained!" :

"John Law - The First Financial Engineer - A History of Paper Money and The Mississippi Bubble" :

https://youtu.be/H5uKPUPQSyQ

Blockchain tech should distance itself from finance and cryptocurrency. The most interesting and promising thing about blockchains is decentralized coordination of group decision making.

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.

This stuff seems pretty crazy, but it's no worse than what happened in early 1900's Wall St. If crypto is ever going to be used as a real payments system, and something you would put in a 401k, it will need regulation similar to stocks. Not sure if it really works, though, because it would remove the anonymity and decentralization that are pitched as the entire advantage of the system.

I'd be curious to read anyone's thoughts on what would have to happen for crypto to improve its image at this point. Would being regulated exactly like traditional banking / finance be enough? More regulation? Would it be regulation + lower rates of fraud, hacks, collapse, and abuse? Or something else I'm not thinking of?

Transparency. Crypto has almost everything needed to be fully transparent with a public ledger but exchanges (CEXes) still operate behind closed doors.

Depositor Insurance probably... But still, every single promise has been burnt in the crypto world.

Ooh, that's a good one. Who on earth would underwrite such a thing?

It would need a legal, non-speculation use-case that isn’t much better solved by extant centralised systems

I think this is the end of fully centralised exchanges. All exchanges will have to build their own Validium and customers will self custody their non fiat funds on that Validium and the centralised exchange merely runs the order book logic and fiat onramp.

I don't see banks losing mainstream support when they have caused massive crisis with derivative products and shit. We rescue them so new generations will be swimming in debt and nothing happens.

It's not about crypto, it's about human nature and avarice.

In the short term – yes. More broadly though, large-scale frauds like this one will only result in increasing government scrutiny and regulation, which can actually be good for the crypto investment ecosystem.

Hmm, tbh, that's a point I hadn't fully considered. To flip your point around, what hypothetical scenario would be bad for the crypto ecosystem long term?

- Bugs or some fundamental/unfixable exploits in bitcoin algorithms

- 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

While I agree that those things would harm the popular perception of crypto, continued fraud, theft, and greed are also doing so too.

It is “just” another hack/collapse. That has been happening since mtgox and earlier and it hasn’t put people off using it l.

Not everything that calls itself "crypto" is decentralized, peer to peer, or a crypto-currency.

https://www.corbettreport.com/bitcoinpsyop/

Shame poorly run companies and stop using them. Mainstream’s insistence on conflating this with crypto masks the proper shaming of mismanaged companies.

I actually see this as an opportunity for the established financial companies to insert themselves into the ecosystem, using their established reputation, processes, and adherence to traditional bank regulation as a 'trust' base that's been both lacking permanently and (whatever was there) eroded over the last 12 months.

Both exchanges and coins / tokens are going at what looks like very cheap right now.

>Their established reputation

The reason trustless decentralized crypto currencies were invented: So we don't have to rely on banking corporation's glowing reputations.

My point is that, amongst the majority populace, traditional banking establishments have immeasurably higher reputations than any entity associated with cryptocurrencies.

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.

We are past the "first they laugh at you" stage, and well into "then they fight you". Been watching this for over a decade, and didn't notice any major censorship until they understood their gig was up; Then, on very short notice, chats and forums flooded with FUD, censorship, all involved search terms got replaced heavily propagandized search results, and any alternative forums floodrd with disinfo. Then they went directly after individuals, with the media and courts; They seemed to never charge them for the stuff they smeared them with, but used anything that would stick, and anything that could actually be used as defense was not allowed. Even jury selection was messed with: If you knew anything about crypto, (if you could actually be consideted a peer) you were rejected. They smear crypto as drug money, while still shipping dollars to drug lords by MAC Flight. It is easy to see what they are doing, if you pay attention.

Crypto that doesn’t suffer from these kinds of failures is boring. It looks like traditional banking with a different API. Exciting maybe for banking nerds, but not so much for anyone else. Ultimately though blockchain ledgers will probably only be long term useful for record keeping between small closed groups of independent entities like banks settling overnight balances between themselves. It’s never going to be entirely algorithmic as there is always the chance of mistake or failure which needs human judgement to correct.

I think most people would say that they want banking to be boring.

And that’s why most people don’t own any crypto

> blockchain ledgers will probably only be long term useful for record keeping between small closed groups of independent entities like banks settling overnight balances between themselves

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.

I'm pro-crypto. This is just a repeat of Mt Gox from 2014. Same scam. Gamblers and get-rich-quick idiots get wiped, as they should. Those people don't want regulation; they see that as an obstacle to becoming billionaires. In a few years, you'll see them gambling their money again.

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.

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