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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

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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bamboozled 4y ago
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.
- BlueTemplar 4y ago
  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 https://youtu.be/H5uKPUPQSyQ
douglaswlance 4y ago
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.
- foogazi 4y ago
  > 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
  - miguelmota 4y ago
    > 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.
    - blueblisters 4y ago
      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.
      - miguelmota 4y ago
        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.
- threeseed 4y ago
  > it should be regulated like a bank And how would they implement KYC/AML regulations which are fundamental to banking ?
  - TEP_Kim_Il_Sung 4y ago
    By force, if necessary.
    - threeseed 4y ago
      No technically. There are seemingly endless ways to move funds anonymously.
      - MacsHeadroom 4y ago
        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.
        threeseed 4y ago
        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.
- YossarianFrPrez 4y ago
  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.)
  - jl2718 4y ago
    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.
    - threeseed 4y ago
      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.
      - pksebben 4y ago
        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.
- croes 4y ago
  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.
  - dmichulke 4y ago
    You forgot: Regulation works but it was just human failure: https://en.wikipedia.org/wiki/MF_Global https://en.wikipedia.org/wiki/MF_Global
  - hestefisk 4y ago
    Socialism to some extent has been successful in some countries. Sweden is a good example.
    - vinay427 4y ago
      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.
    - BlueTemplar 4y ago
      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 ?
  - pksebben 4y ago
    We had gotten rid of bank regulation, which caused 2008. https://www.federalreservehistory.org/essays/glass-steagall-act#:~:text=The%20Glass%2DSteagall%20Act%20effectively,Roosevelt%20in%20June%201933 https://www.federalreservehistory.org/essays/glass-steagall-....
    - croes 4y ago
      Pretty US centric view. Banks in other countries were affected too, despite regulations.
- albertopv 4y ago
  All crypto currencies are a ponzi scheme. Change my mind.
  - px43 4y ago
    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.
    - polygamous_bat 4y ago
      > 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.
      - px43 4y ago
        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.
      - cdiddy2 4y ago
        your definition includes stocks. I suppose you might be right that stocks are a ponzi
        tehjoker 4y ago
        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
      - someguydave 4y ago
- bmitc 4y ago
  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.
  - netheril96 4y ago
    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.
    - bmitc 4y ago
      > 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?
      - wsc981 4y ago
        > 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 ...
        Stention314 4y ago
        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
- Thorrez 4y ago
  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.
  - lottin 4y ago
    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.
    - iamacyborg 4y ago
      Tell that to the folks who forked Ethereum.
    - Thorrez 4y ago
      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.
- hestefisk 4y ago
  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.
  - JamesianP 4y ago
    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".
  - tenpies 4y ago
    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.
- me551ah 4y ago
  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.
  - rabite 4y ago
    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.
    - me551ah 4y ago
      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.
      - kevinak 4y ago
        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.
- polygamous_bat 4y ago
  > This isn't a crypto failure. Crypto works. This is a human failure. "Guns don't kill people, people kill people."
  - mjburgess 4y ago
    A point no one who wants to ban guns would disagree with.
    - pksebben 4y ago
      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.
- listenallyall 4y ago
  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.
- baq 4y ago
  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.
- himinlomax 4y ago
  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.
- MrMan 4y ago
  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.
- deleted 4y ago
  [deleted]
colechristensen 4y ago
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.
- YossarianFrPrez 4y ago
  I think most people would say that they want banking to be boring.
  - nfw2 4y ago
    And that’s why most people don’t own any crypto
- petesergeant 4y ago
  > 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.
paxys 4y ago
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.
- YossarianFrPrez 4y ago
  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?
  - paxys 4y ago
    - 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
    - YossarianFrPrez 4y ago
      While I agree that those things would harm the popular perception of crypto, continued fraud, theft, and greed are also doing so too.
bellBivDinesh 4y ago
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.
- YossarianFrPrez 4y ago
  Indeed. In a way it reminds me of how easy it is to be utopian if you ignore incentives.
- nightski 4y ago
  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.
  - JumpCrisscross 4y ago
    > 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.
    - deleted 4y ago
      [deleted]
    - pksebben 4y ago
      I believe 'centralization' here refers to centralized control. The ledger is distributed anyhow, so not very central.
  - threeseed 4y ago
    > 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.
TEP_Kim_Il_Sung 4y ago
Not everything that calls itself "crypto" is decentralized, peer to peer, or a crypto-currency. https://www.corbettreport.com/bitcoinpsyop/ https://www.corbettreport.com/bitcoinpsyop/
BLKNSLVR 4y ago
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.
- TEP_Kim_Il_Sung 4y ago
  >Their established reputation The reason trustless decentralized crypto currencies were invented: So we don't have to rely on banking corporation's glowing reputations.
  - BLKNSLVR 4y ago
    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.
    - TEP_Kim_Il_Sung 4y ago
      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.
YossarianFrPrez 4y ago
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?
- can16358p 4y ago
  Transparency. Crypto has almost everything needed to be fully transparent with a public ledger but exchanges (CEXes) still operate behind closed doors.
- winternett 4y ago
  Depositor Insurance probably... But still, every single promise has been burnt in the crypto world.
  - YossarianFrPrez 4y ago
    Ooh, that's a good one. Who on earth would underwrite such a thing?
- petesergeant 4y ago
  It would need a legal, non-speculation use-case that isn’t much better solved by extant centralised systems
yieldcrv 4y ago
Shame poorly run companies and stop using them. Mainstream’s insistence on conflating this with crypto masks the proper shaming of mismanaged companies.
electic 4y ago
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.
- bmitc 4y ago
  > 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".
  - jamesknelson 4y ago
    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.
    - lottin 4y ago
      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.
    - RandomLensman 4y ago
      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.
concinds 4y ago
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.
ShredKazoo 4y ago
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.
- alexchantavy 4y ago
  > 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.
  - ShredKazoo 4y ago
    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.
px43 4y ago
This is a Wall Street corruption story. https://twitter.com/wallstreetpro/status/1591167190996504576 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.
- sillysaurusx 4y ago
  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/ https://www.tiktok.com/t/ZTRxWbctK/
  - px43 4y ago
    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.
- polygamous_bat 4y ago
  > 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.
dzink 4y ago
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.
- dzink 4y ago
  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.
- eastbound 4y ago
  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.
irusensei 4y ago
> 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?
imtringued 4y ago
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.
quickthrower2 4y ago
It is “just” another hack/collapse. That has been happening since mtgox and earlier and it hasn’t put people off using it l.
tigrezno 4y ago
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.
listenallyall 4y ago
> 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.
fallingknife 4y ago
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.
bo1024 4y ago
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.
sweep71 4y ago
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.

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bamboozled 4y ago

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.

BlueTemplar 4y ago
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 https://youtu.be/H5uKPUPQSyQ

douglaswlance 4y ago

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.

foogazi 4y ago
> 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
- miguelmota 4y ago
  > 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.
  - blueblisters 4y ago
    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.
    - miguelmota 4y ago
      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.
threeseed 4y ago
> it should be regulated like a bank And how would they implement KYC/AML regulations which are fundamental to banking ?
- TEP_Kim_Il_Sung 4y ago
  By force, if necessary.
  - threeseed 4y ago
    No technically. There are seemingly endless ways to move funds anonymously.
    - MacsHeadroom 4y ago
      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.
      - threeseed 4y ago
        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.
YossarianFrPrez 4y ago
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.)
- jl2718 4y ago
  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.
  - threeseed 4y ago
    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.
    - pksebben 4y ago
      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.
croes 4y ago
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.
- dmichulke 4y ago
  You forgot: Regulation works but it was just human failure: https://en.wikipedia.org/wiki/MF_Global https://en.wikipedia.org/wiki/MF_Global
- hestefisk 4y ago
  Socialism to some extent has been successful in some countries. Sweden is a good example.
  - vinay427 4y ago
    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.
  - BlueTemplar 4y ago
    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 ?
- pksebben 4y ago
  We had gotten rid of bank regulation, which caused 2008. https://www.federalreservehistory.org/essays/glass-steagall-act#:~:text=The%20Glass%2DSteagall%20Act%20effectively,Roosevelt%20in%20June%201933 https://www.federalreservehistory.org/essays/glass-steagall-....
  - croes 4y ago
    Pretty US centric view. Banks in other countries were affected too, despite regulations.
albertopv 4y ago
All crypto currencies are a ponzi scheme. Change my mind.
- px43 4y ago
  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.
  - polygamous_bat 4y ago
    > 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.
    - px43 4y ago
      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.
    - cdiddy2 4y ago
      your definition includes stocks. I suppose you might be right that stocks are a ponzi
      - tehjoker 4y ago
        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
    - someguydave 4y ago
bmitc 4y ago
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.
- netheril96 4y ago
  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.
  - bmitc 4y ago
    > 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?
    - wsc981 4y ago
      > 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 ...
      - Stention314 4y ago
        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
Thorrez 4y ago
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.
- lottin 4y ago
  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.
  - iamacyborg 4y ago
    Tell that to the folks who forked Ethereum.
  - Thorrez 4y ago
    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.
hestefisk 4y ago
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.
- JamesianP 4y ago
  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".
- tenpies 4y ago
  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.
me551ah 4y ago
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.
- rabite 4y ago
  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.
  - me551ah 4y ago
    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.
    - kevinak 4y ago
      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.
polygamous_bat 4y ago
> This isn't a crypto failure. Crypto works. This is a human failure. "Guns don't kill people, people kill people."
- mjburgess 4y ago
  A point no one who wants to ban guns would disagree with.
  - pksebben 4y ago
    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.
listenallyall 4y ago
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.
baq 4y ago
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.
himinlomax 4y ago
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.
MrMan 4y ago
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.
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colechristensen 4y ago

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.

YossarianFrPrez 4y ago
I think most people would say that they want banking to be boring.
- nfw2 4y ago
  And that’s why most people don’t own any crypto
petesergeant 4y ago
> 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.

paxys 4y ago

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.

YossarianFrPrez 4y ago
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?
- paxys 4y ago
  - 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
  - YossarianFrPrez 4y ago
    While I agree that those things would harm the popular perception of crypto, continued fraud, theft, and greed are also doing so too.

bellBivDinesh 4y ago

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.

YossarianFrPrez 4y ago
Indeed. In a way it reminds me of how easy it is to be utopian if you ignore incentives.
nightski 4y ago
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.
- JumpCrisscross 4y ago
  > 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.
  - deleted 4y ago
    [deleted]
  - pksebben 4y ago
    I believe 'centralization' here refers to centralized control. The ledger is distributed anyhow, so not very central.
- threeseed 4y ago
  > 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.

TEP_Kim_Il_Sung 4y ago

Not everything that calls itself "crypto" is decentralized, peer to peer, or a crypto-currency. https://www.corbettreport.com/bitcoinpsyop/ https://www.corbettreport.com/bitcoinpsyop/

BLKNSLVR 4y ago

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.

TEP_Kim_Il_Sung 4y ago
>Their established reputation The reason trustless decentralized crypto currencies were invented: So we don't have to rely on banking corporation's glowing reputations.
- BLKNSLVR 4y ago
  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.
  - TEP_Kim_Il_Sung 4y ago
    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.

YossarianFrPrez 4y ago

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?

can16358p 4y ago
Transparency. Crypto has almost everything needed to be fully transparent with a public ledger but exchanges (CEXes) still operate behind closed doors.
winternett 4y ago
Depositor Insurance probably... But still, every single promise has been burnt in the crypto world.
- YossarianFrPrez 4y ago
  Ooh, that's a good one. Who on earth would underwrite such a thing?
petesergeant 4y ago
It would need a legal, non-speculation use-case that isn’t much better solved by extant centralised systems

yieldcrv 4y ago

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

electic 4y ago

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.

bmitc 4y ago
> 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".
- jamesknelson 4y ago
  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.
  - lottin 4y ago
    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.
  - RandomLensman 4y ago
    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.

concinds 4y ago

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.

ShredKazoo 4y ago

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.

alexchantavy 4y ago
> 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.
- ShredKazoo 4y ago
  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.

px43 4y ago

This is a Wall Street corruption story. https://twitter.com/wallstreetpro/status/1591167190996504576 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.

sillysaurusx 4y ago
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/ https://www.tiktok.com/t/ZTRxWbctK/
- px43 4y ago
  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.
polygamous_bat 4y ago
> 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.

dzink 4y ago

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.

dzink 4y ago
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.
eastbound 4y ago
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.

irusensei 4y ago

> 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?

imtringued 4y ago

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.

quickthrower2 4y ago

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

tigrezno 4y ago

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.

listenallyall 4y ago

> 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.

fallingknife 4y ago

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.

bo1024 4y ago

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.

sweep71 4y ago

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.