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Levine on SBF back in April: > I think of myself as like a fairly cynical person. And that was so much more cynical than how I would've described farming. You'

by d3nj4l 4y ago

Levine on SBF back in April: > I think of myself as like a fairly cynical person. And that was so much more cynical than how I would've described farming. You're just like, well, I'm in the Ponzi business and it's pretty good. I suppose he was right ;) https://www.bloomberg.com/news/articles/2022-04-25/sam-bankman-fried-described-yield-farming-and-left-matt-levine-stunned https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...

panarky 4y ago
Gambling with customers' funds works great for you when you win, and bad for your customers when you lose.
- chii 4y ago
  and this is why banks are not allowed to use customer deposits for such activities. And if they do, they must have equity value to back it up - aka, the bank's share holders lose value _first_ when shit hits the fan, before customer deposits. Then lastly, the gov't has put up guarantees on the deposits in case bank equity cannot cover customer deposits when shit hits the fan. Crypto has none of the above - so basically, it is exactly what happened in the early days of the US financial system - i'm talking in the 1800's!
  - gonzo41 4y ago
    A lot of people have been smoking the copium pipe with crypto. Whenever you rightly make these points there's a flurry of downvotes. The only benefit crypto had, was to early movers. Beyond that it's a waste of effort. I expect in a recessionary environment the pressure for a wider crypto market will be too great for many large operations to sustain. Let's hope all those celebrities who made adds got paid in real cash!
    - arcticbull 4y ago
      > Let's hope all those celebrities who made adds got paid in real cash! At this point it looks like Tom Brady is going to be playing football well into his 50s.
      - gonzo41 4y ago
        Yeah, mistakes were made!
  - FormerBandmate 4y ago
    Banks inherently gamble with customers deposits, every loan is a gamble. They also can invest in certain types of debt securities, there’s security regulations but that isn’t bad on its own. What FTX did is much worse. They spent their customer’s money on stupid shit like the Miami Heat stadium, political donations, and charity work (which was legitimately really good but not their choice to make), and then replenished their own coffers by making their own crypto out of nothing and assigning it to themselves. They essentially stole their customer’s money.
    - seabrookmx 4y ago
      > Banks inherently gamble with customers deposits, every loan is a gamble While there's a ton of nuance here, in the general case it doesn't work how you've implied. When you take out a mortgage, the bank doesn't take a bunch of money other people have deposited. It's literally created out of thin air and marked as a liability on their balance sheet. This is how the majority of money is created in a fractional reserve banking system.
      - fspeech 4y ago
        It's not exactly out of "thin air", since we are trying to be nuanced here. If you take out a mortgage to buy a house the bank does loan you the money out of their own funds. It's just that the seller who receives your funds will put the money back into the banks (not necessarily the same bank, but the money market is there for the banks to settle among themselves). So in effect the sellers make the loans to buyers, intermediated through the financial system.
        JumpCrisscross 4y ago
        > the bank does loan you the money out of their own funds Nope. This is the toy model of money and banking taught in high school. When a bank makes a loan, it creates money. The fact that there are stabilising deposits is a fortunate convenience. This is why leveraged finance is inherently unstable. The BoE had a good paper about this.
  - beambot 4y ago
    1800s? Let me tell you about quantitative easing and sub-prime mortgage backed securities...
    - jakeinspace 4y ago
      But depositors didn’t lose their money.
  - matheusmoreira 4y ago
    This isn't a cryptocurrency problem though. It's a cryptocurrency exchange problem. As you noted, they have essentially reinvented centralized fractional reserve banking with none of the benefits and all of the drawbacks. They're all unregulated banks in disguise. Cryptocurrencies were meant to put an end to such things. Ironic how corporations ended up reinventing it all on top of crypto. Exchanges are everything that's wrong with this space.
    - MauranKilom 4y ago
      I'm not a crypto fan, but don't you need/want things like exchanges to provide liquidity in the market? I mean, that kind of service will spring up entirely naturally due to demand for it, so how do you prevent it from just gravitating to "traditional" finance (which similarly evolved the way it did for a reason)?
    - 0xAFFFF 4y ago
      > Exchanges are everything that's wrong with this space. Exchanges have provided the necessary convenience for mass adoption, providing a way to get your magic beans in exchange for real money without much hassle. Decentralized systems are inherently more complicated than centralized ones and have a harder time gaining traction in the general population (see Mastodon's adoption in the wake of Twitter's turmoil).
    - arcticbull 4y ago
      Crypto is so hard and so intractable that the only way to use it and interact with it for the majority of people is centralized exchanges. In my opinion there's no way to improve that because its all a product of intentional design choices. Centralization and central authority when properly regulated is good. An anarcocapitalist libertarian free-for-all is terrible. Crypto is Gentoo. Centralized exchanges are macOS. There's a reason about 10 people use Gentoo. Most people couldn't care less about recompiling their kernel by hand every 10 business days even if when you squint at it from across the room it could be better. They just want to use their computer. Ditto people wanting to etch their recovery phrase onto aluminum and hide it under their birdbath. Blaming the user will only get you so far. > Cryptocurrencies were meant to put an end to such things. There's a boatload of very good reasons they didn't and won't. I'm not saying they'll disappear, I've been around this space for like 7 years. I know better than to plant the flag. With that said, there's no reason more people will proportionally use crypto in real life - in the fullness of time - than use Gentoo in real life. What that translates to in price, who knows, and frankly who cares?

by d3nj4l 4y ago

panarky 4y ago

Gambling with customers' funds works great for you when you win, and bad for your customers when you lose.

chii 4y ago
and this is why banks are not allowed to use customer deposits for such activities. And if they do, they must have equity value to back it up - aka, the bank's share holders lose value _first_ when shit hits the fan, before customer deposits. Then lastly, the gov't has put up guarantees on the deposits in case bank equity cannot cover customer deposits when shit hits the fan. Crypto has none of the above - so basically, it is exactly what happened in the early days of the US financial system - i'm talking in the 1800's!
- gonzo41 4y ago
  A lot of people have been smoking the copium pipe with crypto. Whenever you rightly make these points there's a flurry of downvotes. The only benefit crypto had, was to early movers. Beyond that it's a waste of effort. I expect in a recessionary environment the pressure for a wider crypto market will be too great for many large operations to sustain. Let's hope all those celebrities who made adds got paid in real cash!
  - arcticbull 4y ago
    > Let's hope all those celebrities who made adds got paid in real cash! At this point it looks like Tom Brady is going to be playing football well into his 50s.
    - gonzo41 4y ago
      Yeah, mistakes were made!
- FormerBandmate 4y ago
  Banks inherently gamble with customers deposits, every loan is a gamble. They also can invest in certain types of debt securities, there’s security regulations but that isn’t bad on its own. What FTX did is much worse. They spent their customer’s money on stupid shit like the Miami Heat stadium, political donations, and charity work (which was legitimately really good but not their choice to make), and then replenished their own coffers by making their own crypto out of nothing and assigning it to themselves. They essentially stole their customer’s money.
  - seabrookmx 4y ago
    > Banks inherently gamble with customers deposits, every loan is a gamble While there's a ton of nuance here, in the general case it doesn't work how you've implied. When you take out a mortgage, the bank doesn't take a bunch of money other people have deposited. It's literally created out of thin air and marked as a liability on their balance sheet. This is how the majority of money is created in a fractional reserve banking system.
    - fspeech 4y ago
      It's not exactly out of "thin air", since we are trying to be nuanced here. If you take out a mortgage to buy a house the bank does loan you the money out of their own funds. It's just that the seller who receives your funds will put the money back into the banks (not necessarily the same bank, but the money market is there for the banks to settle among themselves). So in effect the sellers make the loans to buyers, intermediated through the financial system.
      - JumpCrisscross 4y ago
        > the bank does loan you the money out of their own funds Nope. This is the toy model of money and banking taught in high school. When a bank makes a loan, it creates money. The fact that there are stabilising deposits is a fortunate convenience. This is why leveraged finance is inherently unstable. The BoE had a good paper about this.
- beambot 4y ago
  1800s? Let me tell you about quantitative easing and sub-prime mortgage backed securities...
  - jakeinspace 4y ago
    But depositors didn’t lose their money.
- matheusmoreira 4y ago
  This isn't a cryptocurrency problem though. It's a cryptocurrency exchange problem. As you noted, they have essentially reinvented centralized fractional reserve banking with none of the benefits and all of the drawbacks. They're all unregulated banks in disguise. Cryptocurrencies were meant to put an end to such things. Ironic how corporations ended up reinventing it all on top of crypto. Exchanges are everything that's wrong with this space.
  - MauranKilom 4y ago
    I'm not a crypto fan, but don't you need/want things like exchanges to provide liquidity in the market? I mean, that kind of service will spring up entirely naturally due to demand for it, so how do you prevent it from just gravitating to "traditional" finance (which similarly evolved the way it did for a reason)?
  - 0xAFFFF 4y ago
    > Exchanges are everything that's wrong with this space. Exchanges have provided the necessary convenience for mass adoption, providing a way to get your magic beans in exchange for real money without much hassle. Decentralized systems are inherently more complicated than centralized ones and have a harder time gaining traction in the general population (see Mastodon's adoption in the wake of Twitter's turmoil).
  - arcticbull 4y ago
    Crypto is so hard and so intractable that the only way to use it and interact with it for the majority of people is centralized exchanges. In my opinion there's no way to improve that because its all a product of intentional design choices. Centralization and central authority when properly regulated is good. An anarcocapitalist libertarian free-for-all is terrible. Crypto is Gentoo. Centralized exchanges are macOS. There's a reason about 10 people use Gentoo. Most people couldn't care less about recompiling their kernel by hand every 10 business days even if when you squint at it from across the room it could be better. They just want to use their computer. Ditto people wanting to etch their recovery phrase onto aluminum and hide it under their birdbath. Blaming the user will only get you so far. > Cryptocurrencies were meant to put an end to such things. There's a boatload of very good reasons they didn't and won't. I'm not saying they'll disappear, I've been around this space for like 7 years. I know better than to plant the flag. With that said, there's no reason more people will proportionally use crypto in real life - in the fullness of time - than use Gentoo in real life. What that translates to in price, who knows, and frankly who cares?