FTX is just an exchange right? Any sensible person only puts funds into an exchange that they want to trade. Not your keys, not your crypto.
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 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.
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.