10 ms·

FTX is a centralised exchange, it is not routing all customer trades on chain. It’s not a blockchain failure, it’s just a lack of client asset segregation by a

FTX is a centralised exchange, it is not routing all customer trades on chain. It’s not a blockchain failure, it’s just a lack of client asset segregation by a traditional centralised trading house.

Digory 4y ago
So the internal trades aren't on chain. Well, that's going to leave a mark. Is there a coin that distinguishes agent and owner? Seems like you want trustless agency if you're pursuing trustless finance.
- legutierr 4y ago
  This is the whole idea behind DeFi. All trading is done autonomously on-chain, and owners retain custody throughout.
  - LeafGuild 4y ago
    That's a marketing line, it's not true. Nobody actually has any custody of anything in crypto. The value of the tokens is completely and totally dependent on a consensus of crypto miners doing their job within the parameters of the system, assuming you want them to maintain a price and trading volume that's favorable to the token holders. If the majority of miners suddenly go bust due to outside circumstances, or they decide to conspire together and attack the system, or conspire with some whales to perform a rug pull, or any number of other malicious actions, then it's extremely likely that your tokens aren't going to be worth anything anymore. This applies to every token, including bitcoin.
    - abhimanyue1998 4y ago
      that is true, but the whole ethos of DeFi is to make the process of mining as decentralised as possible. Have many validators, separated across the globe etc. Obviously, there are still chances that all the miners conspire and kill the system, but the chances of that are decreased with increased decentralisation in the mining and validation process.
    - jimbob21 4y ago
      Wow you are uninformed. >The value of the tokens is completely and totally dependent on a consensus of crypto miners doing their job within the parameters of the system, assuming you want them to maintain a price and trading volume that's favorable to the token holders. Number of miners has absolutely nothing to do with trading volumes, not sure where you got that from. Miners don't maintain a price any more than a whale maintains a price. >If the majority of miners suddenly go bust due to outside circumstances The rest of the miners would step in and start making more money, actually. >they decide to conspire together and attack the system, or conspire with some whales to perform a rug pull Not much of a rug pull to sell the tokens you've legitimately acquired through mining or fiat buying. That's just selling. High volatility selling, yes, but still just selling. >it's extremely likely that your tokens aren't going to be worth anything anymore. This applies to every token, including bitcoin. Oh yes, Bitcoin has died thousands of times. Maybe you'll be right one day, but I doubt it.
      - LeafGuild 4y ago
        >Wow you are uninformed. Avoid this style of comment, please. >Miners don't maintain a price any more than a whale maintains a price. Yes, my point is both of them have a means and incentive to manipulate the price in ways that may not be favorable to the trader. >The rest of the miners would step in and start making more money, actually. Yes, at the cost of removing some of the security of the system. They can only maintain security if they have immediate access to more hash power which they probably don't. In that moment because of the sudden drop in hash power, the network is vulnerable to an attack by other malicious miners coming in and taking over. Alternately, if the rest of the miners notice what's going on they could see this as increased opportunity for them to conspire and become malicious. >Not much of a rug pull to sell the tokens you've legitimately acquired through mining or fiat buying. That's just selling. High volatility selling, yes, but still just selling. This right here is the conversation I most dread having with crypto people. It's fraud. You can call it fraud. Manipulating the market so the price is artificially high and then dumping it off onto unsuspecting buyers is a fraud. It doesn't matter how you initially got the coins. Yes, we can group different types of selling into different categories, like ones that are fraudulent and ones that aren't. >Oh yes, Bitcoin has died thousands of times. The exception that proves the rule, huh? There are definitely thousands of shitcoins that have crashed and burned and won't ever recover because they were plain old ponzis. Bitcoin crashed a lot of times, not thousands, but enough to wipe lots of people out every time it happens, relative to the number of people using bitcoin at the time. It's still not clear that any of the money moving around in bitcoin is actually real money or assets. I'm certain it's a ponzi too. >Maybe you'll be right one day, but I doubt it. So you're saying bitcoin is too big to fail, is that right?
    - mirzap 4y ago
      You obviously have no idea what you're talking about. Even if all miners right now colluded and tried to take bitcoin from my wallet - they couldn't. Miners can collude and try to double spend the transaction, hurting centralized exchange for example, but they can not ever take funds from a wallet. You own what's in your wallet. Also, price doesn't depend on miners. Very often in these bear markets miners mine with huge loss. Many give up in those circumstances. If they had any impact on price we wouldn't see so many miners go out of the business.
    - eric_cc 4y ago
      As others have pointed out, this is completely wrong in literally every way possible. > Nobody actually has any custody of anything in crypto. This is insanely wrong and it’s unreal things like this are being said in 2022. DeFi Example: Take your self-custody bitcoin to Thorswap and exchange it for Ethereum. Pure defi. No trust needed. Total self-custody cross chain trading.
chironjit 4y ago
This is the correct answer. When you move your tokens into a centralised exchange like FTX, your funds are pooled with everyones deposit. There are always deposits and wihdrawals, and of course maybe you traded your tokens for another before withdrawing. So its hard to parse how much customers deposited vs genuinely withdrew, and so you cant really tell if the exchange is short unless they declare their actual assets and liabilities.
- cma 4y ago
  From the Sequoia puff-piece: > Something of the sort must happen eventually, as the current system, with its layers upon layers of intermediaries, is antiquated and prone to crashing—the global financial crisis of 2008 was just the latest in a long line of failures that occurred because banks didn’t actually know what was on their balance sheets. Crypto is money that can audit itself, no accountant or bookkeeper needed, and thus a financial system with the blockchain built in can, in theory, cut out most of the financial middlemen, to the advantage of all. Of course, that’s the pitch of every crypto company out there. The FTX competitive advantage? Ethical behavior. SBF is a Peter Singer–inspired utilitarian in a sea of Robert Nozick–inspired libertarians. He’s an ethical maximalist in an industry that’s overwhelmingly populated with ethical minimalists. I’m a Nozick man myself, but I know who I’d rather trust my money with: SBF, hands-down. And if he does end up saving the world as a side effect of being my banker, all the better.
  - joshxyz 4y ago
    aged like my baby momma's milk good lord
  - muxator 4y ago
    I'd like to read this in context; do you know where this declararion could be found? Who is speaking? Thanks!
    - deleted 4y ago
      [deleted]
    - 4y ago
LeafGuild 4y ago
It is absolutely a blockchain failure. Blockchains are intentionally designed to facilitate this. They have no possible way to stop this kind of fraud. Even if you built an elaborate set of smart contracts that could audit participants, they would still not stop anything. That activity can just be moved to another chain and avoid the audits. This kind of thing can just keep happening over and over again, as it already has for the last 12 years. Remember Mt Gox? Nothing fundamental has changed about blockchains that could ever prevent this from happening. It's viewed as a feature that everyone just loses their money sometimes. The designers of blockchains want this to happen. From speaking to them, they view any kind of fraud prevention as an affront to their definition of "economic freedom" and what it entails.
- caminante 4y ago
  > That activity can just be moved to another chain and avoid the audits. > Remember Mt Gox? [...] It's viewed as a feature that everyone just loses their money sometimes [...] From speaking to them, they view any kind of fraud prevention as an affront to their definition of "economic freedom" I found these observations to be helpful reminders how things are (and used to be!). A blockchain isn't designed to indemnify you if you hop on/off the blockchain.
- siftrics 4y ago
  This is not true at all. If you are the only person in the world with the private key to your coins, you are the only person who can move them. Period. FTX is a centralized entity that custodies funds. It has nothing to do with a blockchain, which could have completely prevented this. There are many examples of decentralized exchanges (DEXs) for which it is mathematically impossible to loan out depositor's funds without their consent, because the only person capable of signing a transaction to move the funds is the depositor themself.
  - stouset 4y ago
    > If you are the only person in the world with the private key to your coins, you are the only person who can move them. Period. Right up to the moment you lose your laptop in a fire, forget the password to your wallet, accidentally run malware on your personal computer, etc. Or if you die and haven't gone through the complication of setting up a way for your heirs to gain control of your accounts. Yes, you can take steps to mitigate these risks. Those steps are absolutely insane from the POV of everyday human beings.
kreeben 4y ago
Nothing that a regular Ethereum based crypto exchange wouldn't solve. If that's already been done, hear me out: a decentralized decentralized decentralized exchange! That's bullet proof folks!
- coffeebeqn 4y ago
  Ah yes let me just pay $200 in gas fees to convert my doge to eloncoin. Problem solved
tartoran 4y ago
Whats the difference between FTX and Coinbase for example? Couldn’t coinbase pull the same move?
- colechristensen 4y ago
  Coinbase is a public company trading in the US, they are registered and regulated by the US. Reporting and auditing requirements make this kind of fraud much less likely and punishable earlier than collapse. Shareholder groups or the SEC suspecting this kind of fraud have many avenues to prevent, change, and punish this kind of fraud. FTX was based in the Bahamas.
  - TedDoesntTalk 4y ago
    Yep Coinbase is traded on NASDAQ and is subject to heavy regulation and reporting.
colechristensen 4y ago
It is a blockchain failure in that blockchains in general cannot actually support transactions like this. There's too much volume and there are fees. It is also a regulatory failure, there are reasons this kind of dipping into customer funds is quite illegal in the US. FTX should not have been reachable by US citizens (funding should have been impossible) _or_ FTX should have been sanctioned _by_ the US. There is no reason at all that rogue financial institutions should be allowed to transact with American-regulated banks. If you want to do business in the finance sector with Americans you need to be regulated. Any argument to the contrary is very clearly contradicted by the series of crypto, defi, etc. failures in which gullible Americans lost tons of money while institutions they trusted violated common sense rules that every traditional financial institution in the US must abide by. If you want to have freedom from this kind of regulation, you have to live in a world where these kinds of failures and frauds don't happen. Clearly they happen over and over without competent government watching them.
- vanattab 4y ago
  >It is also a regulatory failure, there are reasons this kind of dipping into customer funds is quite illegal in the US. FTX should not have been reachable by US citizens (funding should have been impossible) _or_ FTX should have been sanctioned _by_ the US I wonder if Sam being the 2nd biggest funder of Democrats has anything to due with this...
  - colechristensen 4y ago
    The SEC has been pretty slow across the board at regulating crypto.
  - tru3_power 4y ago
    Source?
    - zoklet-enjoyer 4y ago
      https://www.forbes.com/sites/mattdurot/2022/11/08/ahead-of-his-crypto-firms-cash-crunch-billionaire-sam-bankman-fried-spent-tens-of-millions-on-politics/ https://www.forbes.com/sites/mattdurot/2022/11/08/ahead-of-h... His mom is Barbara Fried https://stanforddaily.com/2020/01/16/stanford-connected-fundraising-group-wants-to-raise-140-million-for-democrats-in-2020/ https://stanforddaily.com/2020/01/16/stanford-connected-fund...

Digory 4y ago

So the internal trades aren't on chain. Well, that's going to leave a mark. Is there a coin that distinguishes agent and owner? Seems like you want trustless agency if you're pursuing trustless finance.

legutierr 4y ago
This is the whole idea behind DeFi. All trading is done autonomously on-chain, and owners retain custody throughout.
- LeafGuild 4y ago
  That's a marketing line, it's not true. Nobody actually has any custody of anything in crypto. The value of the tokens is completely and totally dependent on a consensus of crypto miners doing their job within the parameters of the system, assuming you want them to maintain a price and trading volume that's favorable to the token holders. If the majority of miners suddenly go bust due to outside circumstances, or they decide to conspire together and attack the system, or conspire with some whales to perform a rug pull, or any number of other malicious actions, then it's extremely likely that your tokens aren't going to be worth anything anymore. This applies to every token, including bitcoin.
  - abhimanyue1998 4y ago
    that is true, but the whole ethos of DeFi is to make the process of mining as decentralised as possible. Have many validators, separated across the globe etc. Obviously, there are still chances that all the miners conspire and kill the system, but the chances of that are decreased with increased decentralisation in the mining and validation process.
  - jimbob21 4y ago
    Wow you are uninformed. >The value of the tokens is completely and totally dependent on a consensus of crypto miners doing their job within the parameters of the system, assuming you want them to maintain a price and trading volume that's favorable to the token holders. Number of miners has absolutely nothing to do with trading volumes, not sure where you got that from. Miners don't maintain a price any more than a whale maintains a price. >If the majority of miners suddenly go bust due to outside circumstances The rest of the miners would step in and start making more money, actually. >they decide to conspire together and attack the system, or conspire with some whales to perform a rug pull Not much of a rug pull to sell the tokens you've legitimately acquired through mining or fiat buying. That's just selling. High volatility selling, yes, but still just selling. >it's extremely likely that your tokens aren't going to be worth anything anymore. This applies to every token, including bitcoin. Oh yes, Bitcoin has died thousands of times. Maybe you'll be right one day, but I doubt it.
    - LeafGuild 4y ago
      >Wow you are uninformed. Avoid this style of comment, please. >Miners don't maintain a price any more than a whale maintains a price. Yes, my point is both of them have a means and incentive to manipulate the price in ways that may not be favorable to the trader. >The rest of the miners would step in and start making more money, actually. Yes, at the cost of removing some of the security of the system. They can only maintain security if they have immediate access to more hash power which they probably don't. In that moment because of the sudden drop in hash power, the network is vulnerable to an attack by other malicious miners coming in and taking over. Alternately, if the rest of the miners notice what's going on they could see this as increased opportunity for them to conspire and become malicious. >Not much of a rug pull to sell the tokens you've legitimately acquired through mining or fiat buying. That's just selling. High volatility selling, yes, but still just selling. This right here is the conversation I most dread having with crypto people. It's fraud. You can call it fraud. Manipulating the market so the price is artificially high and then dumping it off onto unsuspecting buyers is a fraud. It doesn't matter how you initially got the coins. Yes, we can group different types of selling into different categories, like ones that are fraudulent and ones that aren't. >Oh yes, Bitcoin has died thousands of times. The exception that proves the rule, huh? There are definitely thousands of shitcoins that have crashed and burned and won't ever recover because they were plain old ponzis. Bitcoin crashed a lot of times, not thousands, but enough to wipe lots of people out every time it happens, relative to the number of people using bitcoin at the time. It's still not clear that any of the money moving around in bitcoin is actually real money or assets. I'm certain it's a ponzi too. >Maybe you'll be right one day, but I doubt it. So you're saying bitcoin is too big to fail, is that right?
  - mirzap 4y ago
    You obviously have no idea what you're talking about. Even if all miners right now colluded and tried to take bitcoin from my wallet - they couldn't. Miners can collude and try to double spend the transaction, hurting centralized exchange for example, but they can not ever take funds from a wallet. You own what's in your wallet. Also, price doesn't depend on miners. Very often in these bear markets miners mine with huge loss. Many give up in those circumstances. If they had any impact on price we wouldn't see so many miners go out of the business.
  - eric_cc 4y ago
    As others have pointed out, this is completely wrong in literally every way possible. > Nobody actually has any custody of anything in crypto. This is insanely wrong and it’s unreal things like this are being said in 2022. DeFi Example: Take your self-custody bitcoin to Thorswap and exchange it for Ethereum. Pure defi. No trust needed. Total self-custody cross chain trading.

chironjit 4y ago

This is the correct answer. When you move your tokens into a centralised exchange like FTX, your funds are pooled with everyones deposit. There are always deposits and wihdrawals, and of course maybe you traded your tokens for another before withdrawing. So its hard to parse how much customers deposited vs genuinely withdrew, and so you cant really tell if the exchange is short unless they declare their actual assets and liabilities.

cma 4y ago
From the Sequoia puff-piece: > Something of the sort must happen eventually, as the current system, with its layers upon layers of intermediaries, is antiquated and prone to crashing—the global financial crisis of 2008 was just the latest in a long line of failures that occurred because banks didn’t actually know what was on their balance sheets. Crypto is money that can audit itself, no accountant or bookkeeper needed, and thus a financial system with the blockchain built in can, in theory, cut out most of the financial middlemen, to the advantage of all. Of course, that’s the pitch of every crypto company out there. The FTX competitive advantage? Ethical behavior. SBF is a Peter Singer–inspired utilitarian in a sea of Robert Nozick–inspired libertarians. He’s an ethical maximalist in an industry that’s overwhelmingly populated with ethical minimalists. I’m a Nozick man myself, but I know who I’d rather trust my money with: SBF, hands-down. And if he does end up saving the world as a side effect of being my banker, all the better.
- joshxyz 4y ago
  aged like my baby momma's milk good lord
- muxator 4y ago
  I'd like to read this in context; do you know where this declararion could be found? Who is speaking? Thanks!
  - deleted 4y ago
    [deleted]
  - 4y ago

LeafGuild 4y ago

It is absolutely a blockchain failure. Blockchains are intentionally designed to facilitate this. They have no possible way to stop this kind of fraud. Even if you built an elaborate set of smart contracts that could audit participants, they would still not stop anything. That activity can just be moved to another chain and avoid the audits. This kind of thing can just keep happening over and over again, as it already has for the last 12 years. Remember Mt Gox? Nothing fundamental has changed about blockchains that could ever prevent this from happening. It's viewed as a feature that everyone just loses their money sometimes. The designers of blockchains want this to happen. From speaking to them, they view any kind of fraud prevention as an affront to their definition of "economic freedom" and what it entails.

caminante 4y ago
> That activity can just be moved to another chain and avoid the audits. > Remember Mt Gox? [...] It's viewed as a feature that everyone just loses their money sometimes [...] From speaking to them, they view any kind of fraud prevention as an affront to their definition of "economic freedom" I found these observations to be helpful reminders how things are (and used to be!). A blockchain isn't designed to indemnify you if you hop on/off the blockchain.
siftrics 4y ago
This is not true at all. If you are the only person in the world with the private key to your coins, you are the only person who can move them. Period. FTX is a centralized entity that custodies funds. It has nothing to do with a blockchain, which could have completely prevented this. There are many examples of decentralized exchanges (DEXs) for which it is mathematically impossible to loan out depositor's funds without their consent, because the only person capable of signing a transaction to move the funds is the depositor themself.
- stouset 4y ago
  > If you are the only person in the world with the private key to your coins, you are the only person who can move them. Period. Right up to the moment you lose your laptop in a fire, forget the password to your wallet, accidentally run malware on your personal computer, etc. Or if you die and haven't gone through the complication of setting up a way for your heirs to gain control of your accounts. Yes, you can take steps to mitigate these risks. Those steps are absolutely insane from the POV of everyday human beings.

kreeben 4y ago

Nothing that a regular Ethereum based crypto exchange wouldn't solve. If that's already been done, hear me out: a decentralized decentralized decentralized exchange! That's bullet proof folks!

coffeebeqn 4y ago
Ah yes let me just pay $200 in gas fees to convert my doge to eloncoin. Problem solved

tartoran 4y ago

Whats the difference between FTX and Coinbase for example? Couldn’t coinbase pull the same move?

colechristensen 4y ago
Coinbase is a public company trading in the US, they are registered and regulated by the US. Reporting and auditing requirements make this kind of fraud much less likely and punishable earlier than collapse. Shareholder groups or the SEC suspecting this kind of fraud have many avenues to prevent, change, and punish this kind of fraud. FTX was based in the Bahamas.
- TedDoesntTalk 4y ago
  Yep Coinbase is traded on NASDAQ and is subject to heavy regulation and reporting.

colechristensen 4y ago

It is a blockchain failure in that blockchains in general cannot actually support transactions like this. There's too much volume and there are fees. It is also a regulatory failure, there are reasons this kind of dipping into customer funds is quite illegal in the US. FTX should not have been reachable by US citizens (funding should have been impossible) _or_ FTX should have been sanctioned _by_ the US. There is no reason at all that rogue financial institutions should be allowed to transact with American-regulated banks. If you want to do business in the finance sector with Americans you need to be regulated. Any argument to the contrary is very clearly contradicted by the series of crypto, defi, etc. failures in which gullible Americans lost tons of money while institutions they trusted violated common sense rules that every traditional financial institution in the US must abide by. If you want to have freedom from this kind of regulation, you have to live in a world where these kinds of failures and frauds don't happen. Clearly they happen over and over without competent government watching them.

vanattab 4y ago
>It is also a regulatory failure, there are reasons this kind of dipping into customer funds is quite illegal in the US. FTX should not have been reachable by US citizens (funding should have been impossible) _or_ FTX should have been sanctioned _by_ the US I wonder if Sam being the 2nd biggest funder of Democrats has anything to due with this...
- colechristensen 4y ago
  The SEC has been pretty slow across the board at regulating crypto.
- tru3_power 4y ago
  Source?
  - zoklet-enjoyer 4y ago
    https://www.forbes.com/sites/mattdurot/2022/11/08/ahead-of-his-crypto-firms-cash-crunch-billionaire-sam-bankman-fried-spent-tens-of-millions-on-politics/ https://www.forbes.com/sites/mattdurot/2022/11/08/ahead-of-h... His mom is Barbara Fried https://stanforddaily.com/2020/01/16/stanford-connected-fundraising-group-wants-to-raise-140-million-for-democrats-in-2020/ https://stanforddaily.com/2020/01/16/stanford-connected-fund...