SBF Is Headed to Prison but FTX Will Haunt the Crypto Community for Years | Hacker News Reader

SBF Is Headed to Prison but FTX Will Haunt the Crypto Community for Years

gizmodo.com

42 pointsourmandave73 comments

Hmm ... "web3". The article mentions it multiple times, FTX apparently having affted its philosophy, upset its fans, abused its supporters and has people questioning the product.

I have questions too ... like, is this even a thing at all, has it ever been? I must be missing something, I'm just not sure what. From what I can tell, it's crypto/blockhain revolutionizing the web somehow, which I know I am not seeing. I don't think it's DeFi, or maybe that is part of it too because ... that's crypto. What is the "product" that is now reportedly being questioned?

It seems like it's a buzzword. Since I first saw it, I have kept seeing it. The word, nothing else.

If that's the case, then I don't see its philosophy, fans, supporters, and product being affected by events at FTX at all. Because those aren't really things either?

I'm not sure if it matters enough that I should even be spending time asking about it.

Web3 is just a snappy buzzword for blockchain-based computation: smart contracts, Ethereum VMs, all that jazz. But the broader world just knows it all as "crypto", a term that's now thoroughly associated with FTX-style fraud and snake oil, and the fact that nobody's ever managed to do anything useful with "web3" certainly isn't helping.

Web3/crypto is populated by two types: charlatans and marks.

The marks are upset because SBF’s conviction casts doubt on their convictions. Nobody wants to believe they’re a fool.

The charlatans are upset because SBF broke rule one of a con: don’t get caught and ruin it for the rest.

The idea, as far as I can tell, was for web3 to be truly distributed.

That is, there is no single point of failure for any website and no single entity totally controls any site.

Over time as the decentralization bend of crypto faded, so did the meaning of web3.

Eventually it devolved to meaning a site using a crypto wallet for purchases and identity.

At least that’s been my understanding as someone following fairly closely

I think the on-chain products like games are also considered part of web3. Some game developers attempted to store game and user state on chain. As far as I know, these are mostly gambling-type games where the actual gameplay is almost non-existent, and the only attraction (beyond the obvious gambling/crypto) is "the community", "future potential", etc.

The part in the article about calling into question “the most basic tenets of the web3 philosophy” made me laugh. Every statement ever made about web3 has been questionable.

I’m personally not a fan of the term, but here’s what I believe is the steel-man explanation of it:

Web3 refers to how the Ethereum community decided that the user interface to blockchains should be web-like, instead of say via commandline terminal or via Qt desktop apps (like Bitcoin).

You can see this with Metamask, which is essentially Ethereum’s App Store for smart contracts. https://metamask.io/

From that concept, the notion extended into using crypto to augment Web2 apps, like with micropayments or NFTs or the like.

Now it is a catch-all term for the Internet of Value, or the global Web augmented with a native currency that is not controlled by any country or company.

I’m not sure it was a good idea to co-opt a familiar term (Web2.0) and then define blockchain and cryptocurrency in terms of that. It’s unsurprisingly getting pushback, and Ethereum is being accused of “marchitecture” (like with the Pentium4, tech designed for marketing which compromises true performance, or security, or something else). Blockchains are expensive fully replicated distributed databases. They inherently want to host very light weight but high-value data, like accounting ledgers or internet names, and websites and apps are not that.

>Internet of Value

I’m disgusted how a bunch of VC types thought they were so incredibly clever with that piece of dystopian commodification double speak.

To be fair, VC types are not in the business of ethical philosophy. Crypto was not the first tech hype, won't be the last one. VC types will continue to thoughtlessly promote whatever makes them the most money.

With my theory of everything that is wrong…

MBA-ification is actually very very high on the list.

I don't have much insight into MBA programs. But suspect that they give substance to a pre-existing world view, effectively provide tools for justifying (and even reinforcing) bad practices. This is a generalization, of course, but if someone is already a crook, an MBA would only amplify that.

It is that. But also efficiency above all else.

Let’s run lean, let’s do it without human interaction, let’s push our solution first, we can force people in to this, etc.

I used to think Ayn Rand’s comments about creators and consumers were smarts people vs dumb, but that isn’t it at all. I think we’re in a complexity crisis and MBA driven business and large government is in a race for unsustainability.

This is not my primary understanding of where the term "Web 3" came from or refers to (though I'm not really disagreeing with you - the term is sufficiently nebulous that people use it to mean different things in different contexts).

I always understood the primary differences in the Web "versions" to be:

1. Web 1.0: dedicated servers on the Internet producing a lot of content/services by your average user who accesses that content with a web browser.

2. Web 2.0: really focused on the rise of user-generated content, e.g. social media, blogging platforms, image sharing sites, etc. But the architecture is still primarily client-server with end users interacting with server-provided apps.

3. Web 3.0: The main differentiator in Web 3.0 is trustless peer-to-peer architecture. That is, it's no longer about end users needing to connect to Google or Facebook-owned servers to receive and share content. Instead, the content lives on a distributed blockchain that no single entity owns. All of the applications that people talk about in "Web 3.0" like smart contracts, NFTs, etc. arise as a consequence of the underlying architecture being this distributed blockchain.

You’re right, that’s the core part of it. I think I just assume that goes without saying, but it should probably be mentioned explicitly when defining Web3.

web1 = read

web2 = read/write

web3 = read/write/own

Seems a little more like:

- It takes some knowledge to post

- It takes too little knowledge to post

- It takes money to do anything

Not sure why you're getting downvoted. Sure it's not completely accurate but it does embody the "spirit" I think.

I know, you could do writes with Web 1, so it's imperfect, but since that imperfection carries on to Web 3, I kinda like it. In its "wrongness" it kinda suggests it's not that simple.

Web 3 might be "own" - but the -value- of what you own is questionable. There might be things of value in there, but if there is it's well hidden by the crap. "Web with blockchain" doesn't seem like a useful improvement over "Web without block chain" [1].

So I like your summary. It begs the question "own what?" Which in turn kinda answers the Web 3 question in a nutshell.

[1] apart from criminal activity, clearly the killer-app for crypto, the block-chain is useful for time-stamping things. It can be used to prove that say a piece of music existed at a specific point in time. Which could be useful in copyright questions. Granted, this is an astonishingly niche case though.

The time-stamping use case you describe is basically non-existent. Even light media like images are not stored on-chain 99.99% of the time. Time-stamping a URL to an audio track that is hosted on a server you own is not in itself a prove of the existence of this copyrighted material.

I have seen interesting on-chain visual experiments (generative animation fully stored on-chain) but that trend seems to have faded under the pressure of the NFT monetization spike+burst.

You don't have to store the data on-chain. Simply storing a cryptographically-secure hash of the data is sufficient to attest its existence.

Interesting how that was exactly my thought process. I asked the original question, read that response, and then moved almost immediately to ask "own what?". I really wanted to know, as those details are important.

Decided against it, read your response, and saw "begs the question". Yes, it does.

I hope that "NFT"s are not something used as an example in an answer.

The "own" part is a fantasy. Fractional tokens of the world's grain resources, on-chain video hosting, a global decentralized currency exchange, etc... none of that really scaled. Having a secret key to a wallet is not more "ownership" in practical terms than having a bank account with an ID and a password.

The way I understand web3, is that its key promise was to create a trustless global digital environment. Technologically speaking, it works to a large degree. Pragmatically—I don't think it's top of mind for the vast majority of people, including most (ex)web3 advocates.

> FTX apparently having affted its philosophy

What does affted mean?

It is a buzzword now. Originally it meant a decentralized p2p app stack. For instance IPFS for file delivery, EVM for computation, and Greenfield for database operations. In this view bittorent would be an early example of a web3 application. The idea is open and permisionless p2p apps can provide better user service than centralized web2 apps.

Now it’s mostly lost it’s origin meaning.

> I have questions too ... like, is this even a thing at all, has it ever been? I must be missing something, I'm just not sure what.

Define "a thing". As in a thing that VCs threw money at? Absolutely. As in a thing that any normal human ever used or would ever want to use? No, but arguably that wasn't the point.

To add to the confusion, there was previously a thing called Web 3.0, or the Semantic Web. This was a big collection of W3C standards aimed around making internet data machine readable. Its main practical legacy is ActivityPub (and arguably RSS depending on how hard you squint at it). This was completely unrelated.

This is the biggest crypto exchange scandal since the last crypto exchange scandal.

Still waiting for my Mt Gox payout, lol.

It is still amazing that Tether didn’t collapse yet.

Especially considering the revelations from the SBF trial about FTXs relationship with Tether. I remember someone saying that Tether has incredibly strong ties to the underworld (criminal and political), and that's what keep it afloat. They also said if Tether collapses this might lead to a recession (aka "too big to fail").

5% interest on $100B can fill one hell of a balance sheet hole, hella fast.

It’s like complaining that putting Al Capone to prison haunted mob community for years.

The somewhat important difference here is that participation in crypto is voluntary (outside of e.g. extortion). The industry critically relies on reputation, media hype, regulations, etc. FTX collapse and this trial had and will continue having a catastrophic effect on all of the above.

Hard to predict whether crypto/web3 will recover. Saying that, I thought ICO scam would be the end of it, and then soon after NFTs happened...

If it has any worth (and I mean the banking angle of blockchains), it will recover with regulation/technology X, which is the good burden of making all of FTX's misdeeds impossible. If this arguably massive effort is not taken by key players, then all those resources are better spent elsewhere.

The only future for that I can think of is state or large institution owned stablecoins. But that is so far removed from absolutely everything crypto and web3 promised, I wouldn't even put that in the same category. No public ledger, not decentralized, not an alternative to banking, etc. I still don't understand the difference between having $10 in PayPal vs having 10$ in PYUSD.

It’s much easier for the owner of PYUSD to inflate their assets and be insolvent without customers knowing about it. That’s it.

> ...the most trusted exchange in crypto...

> ...tenets of the web3 philosophy...

I usually try to keep a neutral tone, but I'm going to make an exception:

What did I just click on, and why? Just, I mean, I don't even see a news article here. I just see a doomscroll of bottom-feeding ads, and there's literally one paragraph of The-Onion-like satire sprinkled with word-diarrhea vaguely related to the title.

> for a time, FTX was considered the most trusted exchange in crypto.

citation needed

Yeah.. I remember hearing from some other big HFT firms who wouldn't touch FTX (yet were active on other crypto exchanges). They didn't elaborate on why, but we had our own concerns about their preferential treatment of Alameda's orders.

Yeah really, nobody I know trusted FTX at all.

Not sure what kind of citation you're looking for, but just search for HN threads mentioning FTX before the collapse, such as https://news.ycombinator.com/item?id=31738029

I can't recount how many times I've read something along the lines of "FTX is more trustable/better insured/less risky" on HN. And I don't even blame anyone, because the fake numbers did look impressive. Built by people with a trading background and backed by famous VCs. It was also the largest exchange by volume for a while. They had enough money to rescue all the "illiquid" (read: scam) projects. And of course, effective altruism. I never significantly invested in crypto but I would've bought the lie, too.

Knowing what we know now of course it seems like an obvious fraud, and admittedly there are skeptics on any FTX thread (but so were there about any crypto exchange), but the comments who actually foresaw what happened (instead of just referring to a single SBF interview) did either not get traction or are partly even greyed out.

And if you ask people now, you have selection bias. Everyone who was even just a tiny bit distrusting will blow it out of proportion, and those who always believed it was legitimate will stay silent.

> It’s been pretty interesting watching YC backed Coinbase get absolutely crushed by FTX, which has a higher % of crypto trading volume despite having less than 10% of the headcount. [...] FTX was founded by traders which is valuable when the ultimate purpose of the crypto industry is to separate uninformed people from their money.

> FTX is interested in being a real business. I think a lot of people the past several years have failed to try to become a real sustainable business, and instead have been pawns in Benchmark's and Tiger Global's schemes to flip companies into the S&P or into a F500 acquisition.

> FTX people clearly know a lot more about market making and how exchanges work. Makes coinbase look like amateurs.

Gizmodo: We made it up for the click/ragebait.

I do recall earlier this year that SVB was the most trusted bank for these VCs and the startups in Silicon Valley for decades and was one of the biggest bank failures since 2008.

Had the government not intervened (and bailed them out), the entire VCs and startups with their deposits would have been wiped out clean.

Traditional finance like these off-chain markets have always been heavily corrupt. It's a shame that people only hear about the traditional finance markets at the edge of cryptocurrency space (where it touches normal finance) and never about anything that actually happens on a blockchain.

I work in a crypto adjacent business (we provide decoded data from EVM blockchains) and this has had pretty much zero effect on our business (specifically: we continue to get new business with customers that are building their own businesses with real customers and interesting use cases).

It's such an emerging market, there's plenty of opportunity for real businesses to exist and thrive. The Internet in the 90s was filled with scammers and bad actors, eventually ecommerce took hold and the Internet achieved a scale where we stopped really thinking about the primary source: spam. The same might be true for crypto/web3, or it could just stop being relevant like Quora or StackOverflow became in the face of LLMs. It's pretty fun to see it all play out though.

what are these "real customers and interesting use cases" exactly? I'm genuinely curious

In emerging markets, real customers are the ones that pay their bills regularly and actively hire/grow their business, and interesting use cases are subjective, I don't expect to win anyone over by explaining them. You can go dig into EVM businesses and make your own conclusions. Or you can search previous comments I've made on HN and see if you agree or not. I'm a crypto skeptic and joined a company in the space because former coworkers founded it, I can't say that it will work but I've been in emerging tech since the 90s and I'm excited about what may come in the blockchain space now that I've been working in it for ~ a year.

What kind of tech gets you excited? Maybe I can find a customer of mine and draw a line back to what you think is interesting/cool, but, don't expect me to take a shot in the dark and make you suddenly a believer :)

I should also add: I've worked at quite a few startups that I was excited about that ended up to be complete failures, so I don't blame you if you know better. Good for you for always being on the profitable and successful side of emerging tech!

Whoa nelly!

Like I said, I was just genuinely curious

What's the message here. And who's it aimed at?

The message I got from this is that news websites are morphing into content-less, bottom-feeding ad sinkholes that exploit the fact the majority of readers don't read more than one paragraph before engaging in a discussion based solely on the title of the article.

People would rather talk to each other than read an article?

(as for me, yes, definitely)

The article gives us something to talk about?

If it's the talking that matters then the specifics of what we're talking about probably doesn't matter so much. Doesn't even have to be real.

A kind of smalltalk.

To clarify, I agree. I wasn't being sarcastic in my post.

But, I don't like this style of article. It's a kind of internet forum parasite. I really would rather we just post the title, have a discussion about that, and not have to burn my eyes like this.

Just cash out your crypto and move on. There are so many assets out there. Assets that now generate yield, in excess of inflation, with effectively no risk. Diversify away from crypto, use large institutions and you'll never have to worry about getting rug-pulled or any of the myriad other ways to lose your money in crypto again.

If there’s anything but a completely marginal and fringe crypto community in a few years to “haunt” I’ll be astonished.

> This turn of events has to be a bit of a bummer for the droves of anarcho-libertarians who thought platforms like SBF’s might one day usher in an age of decentralized and anonymized exchange that cut government out of the picture completely.

Yeah, and when I was a kid I once closed my eyes and wished for TWO ponies!

The quote above sums up the nonsense of "web 3" (excuse me while I gag a bit) perfectly. The idea that you can somehow set up systems that are free and independent of government and society show how completely unserious these "anarcho-libertarians" are.

It's funny that Bitcoiners are saying that Bitcoin isn't crypto. The term is so toxic that they've disowned it... even though Bitcoin is literally the original crypto!

Bitcoin maximalists prefer to disassociate themselves from alternative cryptocurrencies (aka. alt-coins), all of which they consider to be inferior and unnecessary.

Technically, the 'crypto' in cryptocurrency refers to cryptography, which is a technology cryptocurrencies utilize.

People who want to ban 'crypto' really mean they want to ban cryptocurrencies, not cryptography.

Actual Title: FTX Is Sharing Customer Data With the FBI

Honest question, are people still buying crypto at all?

Honest answer: You can check by googling "Bitcoin graph". When it goes up, people are buying. The answer is...yes.

Or the graph goes up due to market manipulation. How much do you trust Tether?

I lost $20,000 on that shit with various scams (e.g. Terra Luna etc). Never will I tough crypto again and I warn everyone who is potentially falling for the bullshit that is 'web3'.

Blockchain technologies are like Elon's Full Self Driving or hyperloop. Always coming in the future, never actually here. But money is gone already.

People should never invest in things they don't understand.

There are at least 400 of the S&P 500 companies that I don’t meaningfully understand what they do, how exactly they make money, what their defensible moats are, etc.

I still invest in S&P 500 ETFs and believe that to be prudent.

Bitcoin has been rallying lately, as well as the wider sector. Q3 2023 investment was over $2 billion. I have friends who are newly minted millionaires this year from their investments and crypto companies.

HN hive mind doesn’t like crypto. There is still enormous innovation here. BTC will certainly break its all time high after the upcoming halving, and the same know-nothings here will say its true value is zero. Nothing ever changes

the community will simply move to new exchanges and future scams

The comment section on any crypto related post is so predictable.

Everyone who loves seeing bad news about crypto really just wishes they bought in early.

That's really not it. I never bought in. I wouldn't mind some free money, but I have no regrets in never touching it. Even though there were some winners, it's still too risky for my taste. I'm not into gambling, or even investing for that matter, if there's a difference.

But I definitely got burned out on crypto stuff. I'm glad to have more bandwidth to hear about other stuff this year.

When there is a post about crypto do you comment silly things like how there is zero utility and it's all a scam?

I think not. In which case my comment isn't about you.

I agree the crypto hype was ridiculous and annoying. But reading the comments here you can tell some people get glee from seeing bad news about crypto.

I get glee seeing scammers taking Ls for sure.

> Everyone who loves seeing bad news about crypto really just wishes they bought in early.

I have no idea why I feel so compelled to reply, but surely you realize there are people who wouldn't have wanted to follow that path? I'm not really a fan of cryptocurrency "investing". Sure, with the way things went, it would've been a huge quality of life boost, but it's just not that important. Life continued. Instead, I could've won the lottery. Could've invested in Tesla in 2019. Do I sit here bitterly regretting that I hadn't? Nope. I know some people who did pretty well off cryptocurrency and I'm happy for them, but I chose not to play. Of course, my assessment at the time was that it wouldn't go anywhere value-wise; that was wrong, and I blame that at least in part due to the famous John Maynard Keynes quote. ("The markets can remain irrational longer than you can remain solvent") In another timeline I could've also gone bust on it, or worse, it could've become illegal somehow.

That said, I actually don't hate cryptocurrency in spirit, I just do not like the path that it has gone. I wanted an alternative to PayPal and credit card processors that is harder to censor, especially as PayPal and credit card processors repeatedly shy away from hacking tools (Think Flipper Zero, emulators, etc.) and anything related to sex. And I think some of the technology is neat; Monero is really cool in theory. Unstoppable swap and related tech will always be interesting even if they attract unscrupulous actors. But a lot of the work for cryptocurrencies feels like it goes to the dumbest fucking stuff. Like, it'd be nice if there was better solutions for subscription payments. Also, consider the following: let's say I wanted to set up a site that accepts crypto currency payments. I can obviously just put a wallet ID somewhere on the page, but if I want to automate payment processing, I need a way to tie transactions back. It'd also be ideal if the server-side components could be very low-trust so that they can generate wallet addresses and verify payments, but not spend from the wallets. I think this is even technically possible with Monero, but it seems pretty hard and as far as I can tell there are no good off-the-shelf tools for this (Please correct me if I'm wrong, I am certainly interested.) Instead it seems like the defacto answer is integrating some service that does it for you, like Coinbase, which I fully understand why you'd do that if you were adding cryptocurrency payments in addition to Stripe and Paypal or whatever, but to me, this goes against the spirit of cryptocurrency.

So when I see the latest Mt Gox or FTX news, yeah, I am totally feeling zero sympathy for the hodlers, because I viewed cryptocurrency as a potential solution to a serious problem, not as a way to get rich quickly, and I think it's kind of upsetting that this deep in that seems to be its primary legacy still.

There was a lot of noise coming from the people trying to get rich quick. We are all tired of that.

But there is real utility. You can do a lot of the positive things you mentioned with crypto. Admittedly it is still super hard and there are big problems with scalability.

But there are serious people working on those problems.

My comment is pointing out that many anti-crypto comments here are thinly veiled jealousy.

Personally, I don't believe sour grapes accounts for the majority of cryptocurrency skeptics; for the most part, they've been fairly consistent before and after the boom. Of course, at the end of the day, it's not really that important.

Technical issues aside, the current crop of crypto people took the half baked Austrian school economics to their hearts, where scarcity begets value and hyper-deflation makes a desirable outcome.

Satoshi invented Bitcoin as a form of protest against the prevailing economic conditions following the GFC. I don't blame Satoshi for it as he probably wasn't 100% serious about the endeavour, however the way Bitcoin (and majority of crypto that followed) is structured guaranteed that it will end up as a means for people to speculate.

So many people are salty about not getting in at the top of the pyramid scheme.

Honestly, yeah. Until there are rigorous ways to enable consumer protections in crypto (I'm pretty sure this is theoretically intractable) then it's just a space for acammers where some legitimate transactions might occur for markets marginalized by traditional payment processors.

We don't need crypto. We certainly don't need the culture of cryptobros. We need to work on the social progress of the systems we have in place that, you know, have consumer protections.

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