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Somehow these guys peaked at about 900 employees, according to linkedin (https://www.linkedin.com/company/blockfi https://www.linkedin.com/company/blockfi) The

Somehow these guys peaked at about 900 employees, according to linkedin (https://www.linkedin.com/company/blockfi https://www.linkedin.com/company/blockfi) They've raised about a billion dollars of VC - https://www.crunchbase.com/organization/blockfi-inc/investor_financials https://www.crunchbase.com/organization/blockfi-inc/investor... (note, CB lists $1.4b, of which 400M is debt from FTX, which I imagine they never got) Unbelievable the amount of destruction of value here... it's just total carnage.

PM_me_your_math 4y ago
Is it wrong to assume that this is because the industry is mostly built upon a house of cards or because of bad actors? Objectively asking.
- dragonwriter 4y ago
  The industry is mostly built by bad actors on a house of cards.
  - PM_me_your_math 4y ago
- traveler01 4y ago
  That's the thing, you only depend on centralized actors if you want to. The entire point of cryptocurrencies are to not depend on centralized institutions that can screw you over.
  - Nursie 4y ago
    Without a centralized actor of some sort, most 'investors' are not going to be able to get into or out of a crypto position. Vanishingly few people care about using the tokens themselves for anything but gambling. These institutions can also screw you over by massively inflating the crypto bubble and then crashing spectacularly, tanking your value and poisoning the public perception of cryptocurrency. The 'point' of cryptocurrency may well be to avoid dependence on centralized institutions, but the effect of cryptocurrency has been to enable all this nonsense. At this point in time you can't say "well it's not crypto's fault!" because it absolutely is. You don't just look at intent when assessing outcomes.
    - MrMan 4y ago
      yeah if only a few thousand crypto fanatics trade all these coins there is effectively no ecosystem and thus no upward price pressure to make the nerds rich.
  - badpun 4y ago
    When designing the iPhone, one of Apple's findings was that majority of people struggle with understanding the concept of the file system (and hence, there's no visible file system in iOS). In such world, only a small minority of people will be interested in decentralized cryptocurrencies, as the bar of technical skills required is too high for most people. This is what led to the success of centralized cryptobanks.
    - notyourwork 4y ago
      Ding ding ding! Crypto isn’t cool to majority, nor do most want to (or need to) care about it. People want to spend money and if crypto makes that happen so be it. Society had been sending money for awhile without crypto and the edge cases crypto addressed are just that, edge cases. I’m intrigued by crypto but merely because I’m a nerd. I don’t care about crypto when it comes to my day to day life.
    - A4ET8a8uTh0 4y ago
      I hate how accurate this comment is. Without going too far with examples, PGP exists, but using it is simply harder so most people default to an easier email sending. Now.. the question remains as to whether it would be the same, if it tech was not made so accessible ( some people would be forced to learn since the bar was high ). I mostly think that battle is already lost.
      - api 4y ago
        PGP has horrible user experience for experts. Its CLI is incredibly un-intuitive and needlessly complex and integration with mail clients is poor to non-existent.
        nobody9999 4y ago
        >PGP has horrible user experience for experts. Its CLI is incredibly un-intuitive and needlessly complex and integration with mail clients is poor to non-existent. Thunderbird[0] has pretty good (see what I did there?) PGP integration[1]. The UI is decent and there is discoverability support with various key servers as well. But that would require folks to break their addiction to web-based email and use an actual email client. As such, I won't hold my breath. [0] https://www.thunderbird.net/ https://www.thunderbird.net/ [1] https://support.mozilla.org/en-US/kb/openpgp-thunderbird-howto-and-faq https://support.mozilla.org/en-US/kb/openpgp-thunderbird-how...
  - jrm4 4y ago
    So I'm a nerd interested in this stuff and I have specific ideas -- but I just want to say that I appreciate simply seeing this idea in words in a forum. Lately it's just been positively weird how infrequently I see this very very obvious point of the whole thing.
    - lottin 4y ago
      What idea? The idea of "centralised actor" isn't even an idea, it's gibberish.
      - Eisenstein 4y ago
        If it is gibberish, why do many people apparently think it makes sense? Are you using 'gibberish' to disparage something you dislike, rather than to describe something as nonsensical?
        lottin 4y ago
        A lot of people repeat what they hear without giving things any thought. I say it's gibberish because it doesn't mean anything. Try to explain what characteristics set a decentralised actor apart from a centralised actor. Remember that you can't use the word decentralised/centralised, because that's the words we're trying to define.
        Eisenstein 4y ago
        According to wikipedia, under 'Central Bank': "a central bank possesses a monopoly on increasing the monetary base. Most central banks also have supervisory and regulatory powers to ensure the stability of member institutions, to prevent bank runs, and to discourage reckless or fraudulent behavior by member banks." Since the major collapses were by organizations which had a monopoly on creating their own currencies ("tokens") you could call them 'central banks'. Note I am not defending cryptocurrencies -- I am pointing out that you calling something 'gibberish' when people do have an understanding of the meaning is not productive.
  - Analemma_ 4y ago
    If you stored your Luna/FTT/whatever on a personal wallet and never touched an exchange, you still lost all your money. The centralized actors run the show whether you interact with them or not.
    - rjtavares 4y ago
      If you bought BTC before centralized actors became dominant, you didn't lose money. If you bought BTC after, you should have known that could happen.
  - ignoramous 4y ago
    > ...you only depend on centralized actors if you want to. How can one tell that with a straight-face when the poster-boys of crypto (like Coinbase, FTX, ConsenSys, Circle, Uniswap, Binance etc) depend on centralized actors like VCs and Stock Exchanges?
  - rhaway84773 4y ago
    The issue is that the problem cryptocurrencies solve is not a real problem. The blockchain, being a public ledger, ensures that transactions are accurately recorded and can be publicly verified as such. But it’s been centuries since the actual accurate recording of transactions has been an issue. The real problems are far removed from this. When was the last time you heard about people complaining that they paid off their Visa but it did not credit them for the payment? Meanwhile, real problems that people do face, such as a vendor not providing you the goods or services that you paid for, are still a problem with blockchain. The fundamental problem with cryptocurrencies are that they add a whole lot of complexity to solve a problem which is a trivial issue in practice at best, without providing any tools to solve the actual problems people face and in many cases making it harder to find solutions for those problems.
    - deltree7 4y ago
      Blockchain -- Solving Imaginary problems that nobody has...and doing a terrible job of it https://medium.com/@qroshan/block-chain-solving-imaginary-problems-that-nobody-has-487105d90888 https://medium.com/@qroshan/block-chain-solving-imaginary-pr...
    - jtbayly 4y ago
      > real problems that people do face, such as a vendor not providing you the goods or services that you paid for, are still a problem with blockchain. Not just still a problem. Far worse off a problem. Chargebacks exist for credit cards and most bank transactions including wired funds. Send the crypto the wrong way at the wrong time or to the wrong place? Poof. Bye bye money.
    - Karunamon 4y ago
      You ignore the other big benefit which is impossibility of censorship. When was the last time you heard about people complaining that they can't do lawful and legitimate business because Visa or MasterCard (basically a duopoly) don't like them? This problem is not trivial, and as far as I can see crypto is the only scalable solution to it outside of legislation that isn't ever going to happen. What about the privacy implications of having nearly every payment on the planet go through 2 megacorporations? And I can see the response now, while every crypto transaction is public, it's a lot harder to tie identities to wallet addresses than it is to tie a name to a credit card number.
  - adrr 4y ago
    I think most people want a bank that they can trust with their assets. I don't want to store my assets on a hardware wallet that can break or lose and I have to store the backup key in a a safety deposit box. Do you know how hard it is to get a safety deposit box today? Irony is I have to have a bank secure my crypto holdings in case my house burns down.
  - doliveira 4y ago
    It's because of these "idiots" choosing to centralize their decentralized crypto, not due to the smart ones holding on to their keys, that the valuation has skyrocketed.
  - rnk 4y ago
    Crypto has shown that decentralized actors certainly screw you over. All those laws and corporate governance and backup from the govt for banks (which costs something in terms of fees the banks pay) yields people not losing their deposits if banks fail. Occasionally banks still fail today! It doesn't make the news because people don't lose their money.
- Nursie 4y ago
  It's a house of cards, all interlinked and interdependent, all 'investing' in each others' black boxes that magically produce returns, suspiciously in tokens they self-issue, swapping 'billions' in imaginary value and claiming billions more in assets which all mysteriously evaporate in the light of day. And at the bottom of it all, one of the first dominos to tumble, was a company called 3 Arrows Capital, which promised to generate revenue by buying crypto-dickbutt NFTS... and then went on the run. I'm not even kidding.
  - nootropicat 4y ago
    >And at the bottom of it all, one of the first dominos to tumble, was a company called 3 Arrows Capital, which promised to generate revenue by buying crypto-dickbutt NFTS... and then went on the run. I'm not even kidding. They lost borrowed funds in a ponzi scheme called Luna. I get that you wanted to poke at nfts, but the last remark may make someone think this is how it actually went down.
    - Nursie 4y ago
      It is part of what they were doing, part of their investment strategy to grow the funds that were invested with them was to nfts such as "cryptodickbutt #1462". Look it up if you don't believe me. Yes, I'm sure that Terra/Luna was a big part of it, and you're right that it's worth calling out, it may even have been the single biggest factor. But it wasn't the only way 3AC squandered invested funds. Perhaps Terra/Luna should be called out as the first domino to fall, it was indeed spectacular. If it was a ponzi it was a complex one with extra steps, an algorithmic stablecoin that was metastable at best, and IIRC a lending protocol that charged less for loans than it paid for deposits. All sorts of crazy. But 3AC still invested in dickbutt...
      - MrPatan 4y ago
        That cryptodickbutt is probably one of their best investments. I can't see how much they paid for it, it was a transfer. Maybe someone sent it to them as a joke, who knows. In any case, it was around the time they were created, so easily it 20x to today's price. I guess they should have invested more in cryptodickbutts. Look it up if you don't believe me.
- darawk 4y ago
  I think the true answer to this question is that it was/is a gold rush with low interest rates that led large amounts of capital to be allocated to less than competent people. In particular, the companies and operators that look the smartest when a bubble is inflating are the ones that genuinely hedge downside risk the least, while pretending to enough to fool people with capital to allocate. This only becomes apparent, of course, when the bubble pops. As you may notice, this also describes the tech VC bubble of the last decade, too. However, where normal tech has already found its use cases and does real things for real people in the real economy, downside is a little more capped. If you want to be generous to crypto, it's currently tech in 2000, where almost everyone has a total nonsense business model, but that a lot of the vague ideas will eventually find some variant with product-market fit. If you want to be less generous, it's all a house of cards. EDIT: I'll also add that, of course, thinking very carefully about which narrative is true here and being right is the stuff fortunes and careers are made of. The people that weren't dissuaded by the tech crash in 2000 profited handsomely by thinking carefully for themselves about what was actually true and what information was actually latent in the financial crash. Of course, the tulip true believers in 1638 didn't fare nearly as well.
  - dehrmann 4y ago
    > normal tech has already found its use cases and does real things for real people in the real economy For all the problems with gig economy companies, they're not crypto. Uber fell from its high, but it's still facilitating rides and deliveries.
    - jtbayly 4y ago
      And still loses money, right?
      - disgruntledphd2 4y ago
        Yup. They're barely profitable in terms of the metrics they made up ;)
  - spamizbad 4y ago
- Stranger43 4y ago
  Essentially yes. Bitcoins scalability issue should have killed off al notions that it could ever gain widespread usage as an alternative to traditional currency for regular payments and after that it became yet another speculative derivative without any real backing in real world assets. It was never actually going to replace fiat currencies for most people and the industry is absolutely dominated by exotic financial instruments(mostly of the ponzi variant), run by a mixture of fools and scammers.
  - iskander 4y ago
    On the other hand, people chasing the dream of crypto scalability have actually invented a remarkable amount of math and tooling around large scale proof construction, summarization and validation. The Zero Knowledge proof ecosystem (and its relatives in multi-party computation and fully homomorphic encryption) might be the only useful thing that is left after the current incarnation of crypto fully implodes.
    - Stranger43 4y ago
      And yet their fundamental lack of functional economic theory means that all of that is currently being completely wasted on crypto projects that's often little more then window dressing for what is basically very unimaginative financial scams. There is probably scenario's where a temporary blockchain can solve some synchronization issues but the idea that a single static blockchain will replace traditional dynamic structures for organizing the economy is basically not viable.
      - iskander 4y ago
        I think you'll see the ZK stuff used increasingly for non-financial applications, it's a legitimately novel and powerful area of mathematical primitives for verifiable computation. FHE is also very cool and just starting to be usable for privacy preserving ML.
    - _jal 4y ago
      > might be the only useful thing that is left That's a good point. If nothing else, the stupid money caused more practical exploration of ZKP and other exotic math constructs than we'd seen in decades previously. I'd like to see more "toy" exploration of this stuff as the money drains out. That's where interesting things are going to come from, for a while. Time for a zero-knowledge app to select lunch destinations, a dating matcher that doesn't leak before the reveal, secret agent spy communicators for kids...
skrebbel 4y ago
I’m not convinced there’s any destruction of value when the entire value proposition is a lie. When I tell you my lemonade stand is worth a billion, and you believe it for a while, and then you realize it isn’t really, no value was destroyed.
- throwaheyy 4y ago
  Sure it is. If, during that time, I give you $100M for a 10% stake in your lemonade stand, that value is destroyed. If I gave you dollars in return for magic beans that turned out to be imaginary, that value is destroyed.
- largepeepee 4y ago
  There is value, in that a generation of moderately wealthy idiots got convinced that monkey pictures are worth something. Like a cult brainwashing, they have attached their identities to those worthless pictures and now are trapped in greedy stupidity.
  - michaelt 4y ago
    Weren't all those ape NFTs brought with monopoly money anyway? I mean, buying a $1M ape NFT with real money makes no sense - but if you were Sam Bankman-Fried and you had an unlimited supply of coins you knew to be worthless, you're just swapping something worthless for something maybe-worthless, which is much easier to explain.
    - deltree7 4y ago
      No, when you bought an NFT for X Coins, at the same time you could have bought Y dollars. So, the NFT did really cost Y dollars and if it's trading at Z, you have lost Y-Z dollars
  - andirk 4y ago
    NFTs are collectors items. It's as stupid as collecting anything, including fine art, photography, baseball cards, rocks. I'll admit it seems more strange because it's uninteresting, but claiming collecting is idiotic is pretty short-sighted. No, I don't collect that crap :)
stjohnswarts 4y ago
Was it really value or imagined value though?
- mousetree 4y ago
  Real dollars were invested (by their investors and customers)
  - andirk 4y ago
    These comments lead me to believe that a lot of people don't realize fiat was invested by regular people. It wasn't all crypto bros playing with space cash. If that fact isn't understood, then it's pretty clear many of our HN friends are simply here to bash on crypto and scoff at victims of a poorly managed investment firm. I personally haven't seen the same takes on, say, Theran*s or whatever other failed VC-backed investment.
ohgodplsno 4y ago
Taking VC money and spreading it to the winds is the opposite of destruction of value, it's making that money actually useful if it lands in the hands of normal people. Bless the cryptocurrency community, involuntary Robin Hoods that sucker in both users and VC to redistribute it all when it inevitably fails
fdgsdfogijq 4y ago
I talked to an employee that left last spring. She said they had literally no idea what they were doing. The founders are just ivy educated 30 year olds. So they decided to just start hiring everyone they could from paypal, to move into "blockchain payments". They paid huge sums. The directors there had no experience ever managing huge teams of people. It was a giant mess of unqualified people funded by cheap capital. She also said the money movements on the blockchain facilitated by BlockFi were done manually by blockfi employees. The software was a facade and wasnt trusted for large sums of money
- seydor 4y ago
  VC wealth redistribution
  - tehwebguy 4y ago
    Yeah until today. Now it's customer deposit and VC redistribution.
  - ilamont 4y ago
    There are LPs behind a lot of these incompetent VCs dumping money into in crypto, including public workers' pension funds.
    - seydor 4y ago
      Pension funds are investing in VCs?
      - kasey_junk 4y ago
        Yes? It’s extremely common.
      - JumpCrisscross 4y ago
        > Pension funds are investing in VCs? Yes, commonly [1]. At the portfolio level, VC is about as risky as buyout [2]. [1] https://www.thebusinessofvc.com/blog/lp-universe?format=amp https://www.thebusinessofvc.com/blog/lp-universe?format=amp [2] https://timesofe.com/vc-fund-returns-are-more-skewed-than-you-think/ https://timesofe.com/vc-fund-returns-are-more-skewed-than-yo...
tootie 4y ago
I think this will be a major academic topic in economics for the next generation. It's not clear to me that any value was ever created. It was entirely notional. Number go up, number go down. The biggest loser in real terms is the VCs who spent money they possibly earned through real work.
- andirk 4y ago
  I think the biggest victims are the people who held accounts that got drained. They were aware of the risk but they believed people smarter than them at least checked that the bank vault wasn't build on quicksand. VCs have access and ability to do due diligence and they didn't because they're blinded by their own awesomeness.
chinathrow 4y ago
> Unbelievable the amount of destruction of value here... it's just total carnage. Impressive to see that both VC money AND customer money is burnt at immense ammounts. How can these founders sleep at night?
- andirk 4y ago
  The VC money is nothing new. Throw money at a handful of possible game-changers and see what sticks. The customers did not simply buy crypto. They gambled it. That's a gamble on top of a gamble being run by a few people in the Bahamas. What's odd is that those gambles were risky within reason, but the fallout was just pure human corruption and/or incompetence. And putting FTT on balance sheets as actual value is laughable.
woodruffw 4y ago
Given the amount of handwringing we've seen over the past couple of weeks in re: Twitter's headcount, it astonishes me that we haven't seen anything close to that for these cryptocurrency firms. Twitter ran one of the world's largest social media networks with around 7000 people; what in the world is Kraken doing with ~3400[1]? [1]: https://www.linkedin.com/company/krakenfx https://www.linkedin.com/company/krakenfx
- Mistletoe 4y ago
  Kraken actually handles money so it needs customer service and Twitter is just a bunch of already written code for posting stuff and sometimes (although much less now!) getting ad dollars. What do (did) 7000 people do at Twitter? I hate to ask the question because it aligns me with Elon whom I despise right now. But what do all the employees do at tech companies? I thought the beauty of tech and why the valuations were so high is that it scales quite easily since it is all code. What do 32,500 employees at Uber do?
  - woodruffw 4y ago
    The value proposition of decentralized finance was supposed to be a replacement for traditional finance: automating away the hundreds of manual roles that banks currently employ as part of their regulatory requirements and customer services. Do you have a source that shows that a substantial percent of Kraken's headcount is customer service? They've tried recruiting me a handful of times, and each time they highlighted their voracious appetite for engineering talent (and corresponding rapid growth of their engineering teams). As I said: Twitter was one of the largest social media networks on the planet, one that ran its own datacenters and independent ad business (along with moderation teams, service teams, etc.). I'm not particularly interested in defending a headcount of 7000 people; only that it makes far more sense to me than roughly half that number at a cryptocurrency firm.
    - proto-n 4y ago
      To be fair cexes are like a bridge between defi and regular finance and need tech and knowledge in both areas. Ask how larga a headcount dexes like uniswap need, and your argument makes more sense.
themihai 4y ago
Nothing was destroyed. Money was just transferred to smarter guys.
aaronbrethorst 4y ago
Looks like the earliest investors were these folks, so I can’t say I’m particularly surprised. Definitely amused though. https://nymag.com/intelligencer/article/three-arrows-capital-kyle-davies-su-zhu-crash.html https://nymag.com/intelligencer/article/three-arrows-capital...
gumby 4y ago
> Unbelievable the amount of destruction of value here Destruction of value or destruction of paper wealth? I'm pretty cynical of the whole crypto* space, mainly because I think the people making any money in it are themselves cynical and predatory. I suppose that billion dollars of investment was actual cash lost. * Using the new definition, not cryptography, which is what the term really means and will again soon.
- graeme 4y ago
  Both. If you take 900 reasonably skilled people and direct them towards nonsense for a few years, that is definite value lost to society. It sounds like $1 billion in actual cash was lost this way. And the buildings they were in could have housed useful activity, the computers they bought could have done useful things, etc. Those people could have been doing useful things. And it sounds like their activities were worse than nonsense, they actually destroyed money they were given.
  - Haga 4y ago
    It's a whole societal trend, away from real progress towards virtual gambling. I would trade the whole crypto currency space in for one well financed fusion research project.
  - graeme 4y ago
    ^Haga, if you can see this, your comment below mine is dead. Went through your history, doesn't look like you've said anything astonishingly objectionable recently. Your comments are all dead
    - shagie 4y ago
      If you think they're good comments, click directly onto them and [vouch] for them. https://news.ycombinator.com/item?id=11589410 https://news.ycombinator.com/item?id=11589410 (edit) going back... a there appears to be a period of fairly consistent one liner hot takes that may have been received poorly.
Terretta 4y ago
> Unbelievable the amount of destruction of value here... it's just total carnage. I don't see any other replies hypothesizing this in terms that rhyme with the dot com "bust" of 2000. In late 90s, in addition to whatever product-market-fit from their "blue ocean strategies", the dot coms generally invested in and bought services from each other. Wall St didn't look at where the dollars came from or went to the second or third step, they treated every company as if its revenue came from the customer marketplace. Instead, a given VC dollar (or customer dollar) would get spent from that tech firm to its providers, who would give it to their providers, and then their providers, in turn. This way, the same single dollar would show up across a dozen balance sheets, each at 14x growing to 40x and eventually 100x multiples. So the 1 dollar instead of being, say, $40 of "value" for the one firm that got the dollar in from outside the ecosystem, that dollar would show up 12 x 40x or $480 of imagined uncorrelated "value". By 1999, the public companies had caught on to where they could just give cash from public markets to dot com providers to turn around and purchase the public company's goods or services at a discount ( "strategic relationships"), with their own dollars then driving a 40x - 100x market value boost, generating more public dollars they could use to create more "customers". Even if all these companies had legitimate products, when you looked under the hood, relatively few dollars were coming in from outside the private and public markets revenue multiple game. If some of these folks misstepped, and folks started having to unwind expected revenues, and in turn unwind their own spend, and letting the air out happens faster than they can keep their footing .... boom, you have a bust. Today there are multiple sites tracing the actual flow of digital "currency" and seeing the same loops happening, where every agent in the loop is nominally valued as if generating revenue from outside, when instead, they're lock step in a circular flow. Any interruption and ... dot com Y2K 2.0. So less value destruction, more a glitch in the illusion big enough for non-experts to notice absence of outside value.
- MrMan 4y ago
  this has more in common with the S&L crisis than the .com crash. if you are going to use analogies to past events as a crutch
  - Terretta 4y ago
squokko 4y ago
Let's be clear who really destroyed the value - it's the people who took money from pension funds saying they'd invest in cutting edge technology and instead put it into computer meme money startups
StreamBright 4y ago
People need to understand that the amount of money invested in a company does not mean anything. It is most definitely not a validation of the company in any sense.
jzb 4y ago
I think “value” is the wrong word here. These businesses created nothing of value, they were only exercises in accumulating capital and speculating on worthless currencies. This collapse was entirely predictable (and predicted). Agree on the term “carnage,” though.

PM_me_your_math 4y ago

Is it wrong to assume that this is because the industry is mostly built upon a house of cards or because of bad actors? Objectively asking.

dragonwriter 4y ago
The industry is mostly built by bad actors on a house of cards.
- PM_me_your_math 4y ago
traveler01 4y ago
That's the thing, you only depend on centralized actors if you want to. The entire point of cryptocurrencies are to not depend on centralized institutions that can screw you over.
- Nursie 4y ago
  Without a centralized actor of some sort, most 'investors' are not going to be able to get into or out of a crypto position. Vanishingly few people care about using the tokens themselves for anything but gambling. These institutions can also screw you over by massively inflating the crypto bubble and then crashing spectacularly, tanking your value and poisoning the public perception of cryptocurrency. The 'point' of cryptocurrency may well be to avoid dependence on centralized institutions, but the effect of cryptocurrency has been to enable all this nonsense. At this point in time you can't say "well it's not crypto's fault!" because it absolutely is. You don't just look at intent when assessing outcomes.
  - MrMan 4y ago
    yeah if only a few thousand crypto fanatics trade all these coins there is effectively no ecosystem and thus no upward price pressure to make the nerds rich.
- badpun 4y ago
  When designing the iPhone, one of Apple's findings was that majority of people struggle with understanding the concept of the file system (and hence, there's no visible file system in iOS). In such world, only a small minority of people will be interested in decentralized cryptocurrencies, as the bar of technical skills required is too high for most people. This is what led to the success of centralized cryptobanks.
  - notyourwork 4y ago
    Ding ding ding! Crypto isn’t cool to majority, nor do most want to (or need to) care about it. People want to spend money and if crypto makes that happen so be it. Society had been sending money for awhile without crypto and the edge cases crypto addressed are just that, edge cases. I’m intrigued by crypto but merely because I’m a nerd. I don’t care about crypto when it comes to my day to day life.
  - A4ET8a8uTh0 4y ago
    I hate how accurate this comment is. Without going too far with examples, PGP exists, but using it is simply harder so most people default to an easier email sending. Now.. the question remains as to whether it would be the same, if it tech was not made so accessible ( some people would be forced to learn since the bar was high ). I mostly think that battle is already lost.
    - api 4y ago
      PGP has horrible user experience for experts. Its CLI is incredibly un-intuitive and needlessly complex and integration with mail clients is poor to non-existent.
      - nobody9999 4y ago
        >PGP has horrible user experience for experts. Its CLI is incredibly un-intuitive and needlessly complex and integration with mail clients is poor to non-existent. Thunderbird[0] has pretty good (see what I did there?) PGP integration[1]. The UI is decent and there is discoverability support with various key servers as well. But that would require folks to break their addiction to web-based email and use an actual email client. As such, I won't hold my breath. [0] https://www.thunderbird.net/ https://www.thunderbird.net/ [1] https://support.mozilla.org/en-US/kb/openpgp-thunderbird-howto-and-faq https://support.mozilla.org/en-US/kb/openpgp-thunderbird-how...
- jrm4 4y ago
  So I'm a nerd interested in this stuff and I have specific ideas -- but I just want to say that I appreciate simply seeing this idea in words in a forum. Lately it's just been positively weird how infrequently I see this very very obvious point of the whole thing.
  - lottin 4y ago
    What idea? The idea of "centralised actor" isn't even an idea, it's gibberish.
    - Eisenstein 4y ago
      If it is gibberish, why do many people apparently think it makes sense? Are you using 'gibberish' to disparage something you dislike, rather than to describe something as nonsensical?
      - lottin 4y ago
        A lot of people repeat what they hear without giving things any thought. I say it's gibberish because it doesn't mean anything. Try to explain what characteristics set a decentralised actor apart from a centralised actor. Remember that you can't use the word decentralised/centralised, because that's the words we're trying to define.
        Eisenstein 4y ago
        According to wikipedia, under 'Central Bank': "a central bank possesses a monopoly on increasing the monetary base. Most central banks also have supervisory and regulatory powers to ensure the stability of member institutions, to prevent bank runs, and to discourage reckless or fraudulent behavior by member banks." Since the major collapses were by organizations which had a monopoly on creating their own currencies ("tokens") you could call them 'central banks'. Note I am not defending cryptocurrencies -- I am pointing out that you calling something 'gibberish' when people do have an understanding of the meaning is not productive.
- Analemma_ 4y ago
  If you stored your Luna/FTT/whatever on a personal wallet and never touched an exchange, you still lost all your money. The centralized actors run the show whether you interact with them or not.
  - rjtavares 4y ago
    If you bought BTC before centralized actors became dominant, you didn't lose money. If you bought BTC after, you should have known that could happen.
- ignoramous 4y ago
  > ...you only depend on centralized actors if you want to. How can one tell that with a straight-face when the poster-boys of crypto (like Coinbase, FTX, ConsenSys, Circle, Uniswap, Binance etc) depend on centralized actors like VCs and Stock Exchanges?
- rhaway84773 4y ago
  The issue is that the problem cryptocurrencies solve is not a real problem. The blockchain, being a public ledger, ensures that transactions are accurately recorded and can be publicly verified as such. But it’s been centuries since the actual accurate recording of transactions has been an issue. The real problems are far removed from this. When was the last time you heard about people complaining that they paid off their Visa but it did not credit them for the payment? Meanwhile, real problems that people do face, such as a vendor not providing you the goods or services that you paid for, are still a problem with blockchain. The fundamental problem with cryptocurrencies are that they add a whole lot of complexity to solve a problem which is a trivial issue in practice at best, without providing any tools to solve the actual problems people face and in many cases making it harder to find solutions for those problems.
  - deltree7 4y ago
    Blockchain -- Solving Imaginary problems that nobody has...and doing a terrible job of it https://medium.com/@qroshan/block-chain-solving-imaginary-problems-that-nobody-has-487105d90888 https://medium.com/@qroshan/block-chain-solving-imaginary-pr...
  - jtbayly 4y ago
    > real problems that people do face, such as a vendor not providing you the goods or services that you paid for, are still a problem with blockchain. Not just still a problem. Far worse off a problem. Chargebacks exist for credit cards and most bank transactions including wired funds. Send the crypto the wrong way at the wrong time or to the wrong place? Poof. Bye bye money.
  - Karunamon 4y ago
    You ignore the other big benefit which is impossibility of censorship. When was the last time you heard about people complaining that they can't do lawful and legitimate business because Visa or MasterCard (basically a duopoly) don't like them? This problem is not trivial, and as far as I can see crypto is the only scalable solution to it outside of legislation that isn't ever going to happen. What about the privacy implications of having nearly every payment on the planet go through 2 megacorporations? And I can see the response now, while every crypto transaction is public, it's a lot harder to tie identities to wallet addresses than it is to tie a name to a credit card number.
- adrr 4y ago
  I think most people want a bank that they can trust with their assets. I don't want to store my assets on a hardware wallet that can break or lose and I have to store the backup key in a a safety deposit box. Do you know how hard it is to get a safety deposit box today? Irony is I have to have a bank secure my crypto holdings in case my house burns down.
- doliveira 4y ago
  It's because of these "idiots" choosing to centralize their decentralized crypto, not due to the smart ones holding on to their keys, that the valuation has skyrocketed.
- rnk 4y ago
  Crypto has shown that decentralized actors certainly screw you over. All those laws and corporate governance and backup from the govt for banks (which costs something in terms of fees the banks pay) yields people not losing their deposits if banks fail. Occasionally banks still fail today! It doesn't make the news because people don't lose their money.
Nursie 4y ago
It's a house of cards, all interlinked and interdependent, all 'investing' in each others' black boxes that magically produce returns, suspiciously in tokens they self-issue, swapping 'billions' in imaginary value and claiming billions more in assets which all mysteriously evaporate in the light of day. And at the bottom of it all, one of the first dominos to tumble, was a company called 3 Arrows Capital, which promised to generate revenue by buying crypto-dickbutt NFTS... and then went on the run. I'm not even kidding.
- nootropicat 4y ago
  >And at the bottom of it all, one of the first dominos to tumble, was a company called 3 Arrows Capital, which promised to generate revenue by buying crypto-dickbutt NFTS... and then went on the run. I'm not even kidding. They lost borrowed funds in a ponzi scheme called Luna. I get that you wanted to poke at nfts, but the last remark may make someone think this is how it actually went down.
  - Nursie 4y ago
    It is part of what they were doing, part of their investment strategy to grow the funds that were invested with them was to nfts such as "cryptodickbutt #1462". Look it up if you don't believe me. Yes, I'm sure that Terra/Luna was a big part of it, and you're right that it's worth calling out, it may even have been the single biggest factor. But it wasn't the only way 3AC squandered invested funds. Perhaps Terra/Luna should be called out as the first domino to fall, it was indeed spectacular. If it was a ponzi it was a complex one with extra steps, an algorithmic stablecoin that was metastable at best, and IIRC a lending protocol that charged less for loans than it paid for deposits. All sorts of crazy. But 3AC still invested in dickbutt...
    - MrPatan 4y ago
      That cryptodickbutt is probably one of their best investments. I can't see how much they paid for it, it was a transfer. Maybe someone sent it to them as a joke, who knows. In any case, it was around the time they were created, so easily it 20x to today's price. I guess they should have invested more in cryptodickbutts. Look it up if you don't believe me.
darawk 4y ago
I think the true answer to this question is that it was/is a gold rush with low interest rates that led large amounts of capital to be allocated to less than competent people. In particular, the companies and operators that look the smartest when a bubble is inflating are the ones that genuinely hedge downside risk the least, while pretending to enough to fool people with capital to allocate. This only becomes apparent, of course, when the bubble pops. As you may notice, this also describes the tech VC bubble of the last decade, too. However, where normal tech has already found its use cases and does real things for real people in the real economy, downside is a little more capped. If you want to be generous to crypto, it's currently tech in 2000, where almost everyone has a total nonsense business model, but that a lot of the vague ideas will eventually find some variant with product-market fit. If you want to be less generous, it's all a house of cards. EDIT: I'll also add that, of course, thinking very carefully about which narrative is true here and being right is the stuff fortunes and careers are made of. The people that weren't dissuaded by the tech crash in 2000 profited handsomely by thinking carefully for themselves about what was actually true and what information was actually latent in the financial crash. Of course, the tulip true believers in 1638 didn't fare nearly as well.
- dehrmann 4y ago
  > normal tech has already found its use cases and does real things for real people in the real economy For all the problems with gig economy companies, they're not crypto. Uber fell from its high, but it's still facilitating rides and deliveries.
  - jtbayly 4y ago
    And still loses money, right?
    - disgruntledphd2 4y ago
      Yup. They're barely profitable in terms of the metrics they made up ;)
- spamizbad 4y ago
Stranger43 4y ago
Essentially yes. Bitcoins scalability issue should have killed off al notions that it could ever gain widespread usage as an alternative to traditional currency for regular payments and after that it became yet another speculative derivative without any real backing in real world assets. It was never actually going to replace fiat currencies for most people and the industry is absolutely dominated by exotic financial instruments(mostly of the ponzi variant), run by a mixture of fools and scammers.
- iskander 4y ago
  On the other hand, people chasing the dream of crypto scalability have actually invented a remarkable amount of math and tooling around large scale proof construction, summarization and validation. The Zero Knowledge proof ecosystem (and its relatives in multi-party computation and fully homomorphic encryption) might be the only useful thing that is left after the current incarnation of crypto fully implodes.
  - Stranger43 4y ago
    And yet their fundamental lack of functional economic theory means that all of that is currently being completely wasted on crypto projects that's often little more then window dressing for what is basically very unimaginative financial scams. There is probably scenario's where a temporary blockchain can solve some synchronization issues but the idea that a single static blockchain will replace traditional dynamic structures for organizing the economy is basically not viable.
    - iskander 4y ago
      I think you'll see the ZK stuff used increasingly for non-financial applications, it's a legitimately novel and powerful area of mathematical primitives for verifiable computation. FHE is also very cool and just starting to be usable for privacy preserving ML.
  - _jal 4y ago
    > might be the only useful thing that is left That's a good point. If nothing else, the stupid money caused more practical exploration of ZKP and other exotic math constructs than we'd seen in decades previously. I'd like to see more "toy" exploration of this stuff as the money drains out. That's where interesting things are going to come from, for a while. Time for a zero-knowledge app to select lunch destinations, a dating matcher that doesn't leak before the reveal, secret agent spy communicators for kids...

skrebbel 4y ago

I’m not convinced there’s any destruction of value when the entire value proposition is a lie. When I tell you my lemonade stand is worth a billion, and you believe it for a while, and then you realize it isn’t really, no value was destroyed.

throwaheyy 4y ago
Sure it is. If, during that time, I give you $100M for a 10% stake in your lemonade stand, that value is destroyed. If I gave you dollars in return for magic beans that turned out to be imaginary, that value is destroyed.
largepeepee 4y ago
There is value, in that a generation of moderately wealthy idiots got convinced that monkey pictures are worth something. Like a cult brainwashing, they have attached their identities to those worthless pictures and now are trapped in greedy stupidity.
- michaelt 4y ago
  Weren't all those ape NFTs brought with monopoly money anyway? I mean, buying a $1M ape NFT with real money makes no sense - but if you were Sam Bankman-Fried and you had an unlimited supply of coins you knew to be worthless, you're just swapping something worthless for something maybe-worthless, which is much easier to explain.
  - deltree7 4y ago
    No, when you bought an NFT for X Coins, at the same time you could have bought Y dollars. So, the NFT did really cost Y dollars and if it's trading at Z, you have lost Y-Z dollars
- andirk 4y ago
  NFTs are collectors items. It's as stupid as collecting anything, including fine art, photography, baseball cards, rocks. I'll admit it seems more strange because it's uninteresting, but claiming collecting is idiotic is pretty short-sighted. No, I don't collect that crap :)

stjohnswarts 4y ago

Was it really value or imagined value though?

mousetree 4y ago
Real dollars were invested (by their investors and customers)
- andirk 4y ago
  These comments lead me to believe that a lot of people don't realize fiat was invested by regular people. It wasn't all crypto bros playing with space cash. If that fact isn't understood, then it's pretty clear many of our HN friends are simply here to bash on crypto and scoff at victims of a poorly managed investment firm. I personally haven't seen the same takes on, say, Theran*s or whatever other failed VC-backed investment.

ohgodplsno 4y ago

Taking VC money and spreading it to the winds is the opposite of destruction of value, it's making that money actually useful if it lands in the hands of normal people. Bless the cryptocurrency community, involuntary Robin Hoods that sucker in both users and VC to redistribute it all when it inevitably fails

fdgsdfogijq 4y ago

I talked to an employee that left last spring. She said they had literally no idea what they were doing. The founders are just ivy educated 30 year olds. So they decided to just start hiring everyone they could from paypal, to move into "blockchain payments". They paid huge sums. The directors there had no experience ever managing huge teams of people. It was a giant mess of unqualified people funded by cheap capital. She also said the money movements on the blockchain facilitated by BlockFi were done manually by blockfi employees. The software was a facade and wasnt trusted for large sums of money

seydor 4y ago
VC wealth redistribution
- tehwebguy 4y ago
  Yeah until today. Now it's customer deposit and VC redistribution.
- ilamont 4y ago
  There are LPs behind a lot of these incompetent VCs dumping money into in crypto, including public workers' pension funds.
  - seydor 4y ago
    Pension funds are investing in VCs?
    - kasey_junk 4y ago
      Yes? It’s extremely common.
    - JumpCrisscross 4y ago
      > Pension funds are investing in VCs? Yes, commonly [1]. At the portfolio level, VC is about as risky as buyout [2]. [1] https://www.thebusinessofvc.com/blog/lp-universe?format=amp https://www.thebusinessofvc.com/blog/lp-universe?format=amp [2] https://timesofe.com/vc-fund-returns-are-more-skewed-than-you-think/ https://timesofe.com/vc-fund-returns-are-more-skewed-than-yo...

tootie 4y ago

I think this will be a major academic topic in economics for the next generation. It's not clear to me that any value was ever created. It was entirely notional. Number go up, number go down. The biggest loser in real terms is the VCs who spent money they possibly earned through real work.

andirk 4y ago
I think the biggest victims are the people who held accounts that got drained. They were aware of the risk but they believed people smarter than them at least checked that the bank vault wasn't build on quicksand. VCs have access and ability to do due diligence and they didn't because they're blinded by their own awesomeness.

chinathrow 4y ago

> Unbelievable the amount of destruction of value here... it's just total carnage. Impressive to see that both VC money AND customer money is burnt at immense ammounts. How can these founders sleep at night?

andirk 4y ago
The VC money is nothing new. Throw money at a handful of possible game-changers and see what sticks. The customers did not simply buy crypto. They gambled it. That's a gamble on top of a gamble being run by a few people in the Bahamas. What's odd is that those gambles were risky within reason, but the fallout was just pure human corruption and/or incompetence. And putting FTT on balance sheets as actual value is laughable.

woodruffw 4y ago

Given the amount of handwringing we've seen over the past couple of weeks in re: Twitter's headcount, it astonishes me that we haven't seen anything close to that for these cryptocurrency firms. Twitter ran one of the world's largest social media networks with around 7000 people; what in the world is Kraken doing with ~3400[1]? [1]: https://www.linkedin.com/company/krakenfx https://www.linkedin.com/company/krakenfx

Mistletoe 4y ago
Kraken actually handles money so it needs customer service and Twitter is just a bunch of already written code for posting stuff and sometimes (although much less now!) getting ad dollars. What do (did) 7000 people do at Twitter? I hate to ask the question because it aligns me with Elon whom I despise right now. But what do all the employees do at tech companies? I thought the beauty of tech and why the valuations were so high is that it scales quite easily since it is all code. What do 32,500 employees at Uber do?
- woodruffw 4y ago
  The value proposition of decentralized finance was supposed to be a replacement for traditional finance: automating away the hundreds of manual roles that banks currently employ as part of their regulatory requirements and customer services. Do you have a source that shows that a substantial percent of Kraken's headcount is customer service? They've tried recruiting me a handful of times, and each time they highlighted their voracious appetite for engineering talent (and corresponding rapid growth of their engineering teams). As I said: Twitter was one of the largest social media networks on the planet, one that ran its own datacenters and independent ad business (along with moderation teams, service teams, etc.). I'm not particularly interested in defending a headcount of 7000 people; only that it makes far more sense to me than roughly half that number at a cryptocurrency firm.
  - proto-n 4y ago
    To be fair cexes are like a bridge between defi and regular finance and need tech and knowledge in both areas. Ask how larga a headcount dexes like uniswap need, and your argument makes more sense.

themihai 4y ago

Nothing was destroyed. Money was just transferred to smarter guys.

aaronbrethorst 4y ago

Looks like the earliest investors were these folks, so I can’t say I’m particularly surprised. Definitely amused though. https://nymag.com/intelligencer/article/three-arrows-capital-kyle-davies-su-zhu-crash.html https://nymag.com/intelligencer/article/three-arrows-capital...

gumby 4y ago

> Unbelievable the amount of destruction of value here Destruction of value or destruction of paper wealth? I'm pretty cynical of the whole crypto* space, mainly because I think the people making any money in it are themselves cynical and predatory. I suppose that billion dollars of investment was actual cash lost. * Using the new definition, not cryptography, which is what the term really means and will again soon.

graeme 4y ago
Both. If you take 900 reasonably skilled people and direct them towards nonsense for a few years, that is definite value lost to society. It sounds like $1 billion in actual cash was lost this way. And the buildings they were in could have housed useful activity, the computers they bought could have done useful things, etc. Those people could have been doing useful things. And it sounds like their activities were worse than nonsense, they actually destroyed money they were given.
- Haga 4y ago
  It's a whole societal trend, away from real progress towards virtual gambling. I would trade the whole crypto currency space in for one well financed fusion research project.
- graeme 4y ago
  ^Haga, if you can see this, your comment below mine is dead. Went through your history, doesn't look like you've said anything astonishingly objectionable recently. Your comments are all dead
  - shagie 4y ago
    If you think they're good comments, click directly onto them and [vouch] for them. https://news.ycombinator.com/item?id=11589410 https://news.ycombinator.com/item?id=11589410 (edit) going back... a there appears to be a period of fairly consistent one liner hot takes that may have been received poorly.

Terretta 4y ago

> Unbelievable the amount of destruction of value here... it's just total carnage. I don't see any other replies hypothesizing this in terms that rhyme with the dot com "bust" of 2000. In late 90s, in addition to whatever product-market-fit from their "blue ocean strategies", the dot coms generally invested in and bought services from each other. Wall St didn't look at where the dollars came from or went to the second or third step, they treated every company as if its revenue came from the customer marketplace. Instead, a given VC dollar (or customer dollar) would get spent from that tech firm to its providers, who would give it to their providers, and then their providers, in turn. This way, the same single dollar would show up across a dozen balance sheets, each at 14x growing to 40x and eventually 100x multiples. So the 1 dollar instead of being, say, $40 of "value" for the one firm that got the dollar in from outside the ecosystem, that dollar would show up 12 x 40x or $480 of imagined uncorrelated "value". By 1999, the public companies had caught on to where they could just give cash from public markets to dot com providers to turn around and purchase the public company's goods or services at a discount ( "strategic relationships"), with their own dollars then driving a 40x - 100x market value boost, generating more public dollars they could use to create more "customers". Even if all these companies had legitimate products, when you looked under the hood, relatively few dollars were coming in from outside the private and public markets revenue multiple game. If some of these folks misstepped, and folks started having to unwind expected revenues, and in turn unwind their own spend, and letting the air out happens faster than they can keep their footing .... boom, you have a bust. Today there are multiple sites tracing the actual flow of digital "currency" and seeing the same loops happening, where every agent in the loop is nominally valued as if generating revenue from outside, when instead, they're lock step in a circular flow. Any interruption and ... dot com Y2K 2.0. So less value destruction, more a glitch in the illusion big enough for non-experts to notice absence of outside value.

MrMan 4y ago
this has more in common with the S&L crisis than the .com crash. if you are going to use analogies to past events as a crutch
- Terretta 4y ago

squokko 4y ago

Let's be clear who really destroyed the value - it's the people who took money from pension funds saying they'd invest in cutting edge technology and instead put it into computer meme money startups

StreamBright 4y ago

People need to understand that the amount of money invested in a company does not mean anything. It is most definitely not a validation of the company in any sense.

jzb 4y ago

I think “value” is the wrong word here. These businesses created nothing of value, they were only exercises in accumulating capital and speculating on worthless currencies. This collapse was entirely predictable (and predicted). Agree on the term “carnage,” though.