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> The effort to paint over such blatant fraud and negligence and pretend it was all a mistake from a well-meaning kiddo is disgusting Let's not forget that the

> The effort to paint over such blatant fraud and negligence and pretend it was all a mistake from a well-meaning kiddo is disgusting Let's not forget that the folks using FTX were only doing so in an attempt to steal money from others. If the key innovation of crypto is that it's supposed to reduce the risk of lending by bringing realtime transparency to the assets and liabilities of borrowers, then why was FTX paying vastly higher interest rates than traditional banks? It's hard to feel sorry for those who lost their money because they thought they were in on the con or whatever. You can hear the folks who lost money saying this themselves, e.g.: https://www.youtube.com/watch?v=9cATvKsZA0A https://www.youtube.com/watch?v=9cATvKsZA0A And to those who think I'm being uncharitable, I've been saying the same thing on HN since long before the FTX collapse, e.g.: https://news.ycombinator.com/item?id=28457273 https://news.ycombinator.com/item?id=28457273

DiggyJohnson 4y ago
I’m not in total disagreement with your point, and, frankly, I’m glad that you made it. But how would you respond to the argument: those that lost money in FTX weren’t consciously in on the con, but instead had (vastly) exaggerated expectations about the future of crypto?
- Alex3917 4y ago
  > those that lost money in FTX weren’t consciously in on the con, but instead had (vastly) exaggerated expectations about the future of crypto? I've said multiple times on HN that I consider blockchain to be the most economically important invention of the last 500 years, e.g.: https://news.ycombinator.com/item?id=14633148 https://news.ycombinator.com/item?id=14633148 https://news.ycombinator.com/item?id=18574399 https://news.ycombinator.com/item?id=18574399 But the reason it's exciting is, among other things, because it should radically drive down the cost of borrowing money. So yeah, I'm probably literally on the most bullish person on crypto on HN, but that's why it's so easy for me to see how the folks chasing those double digit interest rates on FTX aren't exactly the innocent victims they're being portrayed as. I'm hardly an economist, but even the most financially illiterate people know that interest rates should be vaguely proportional to risk.
  - FabHK 4y ago
    > interest rates should be vaguely proportional to risk. Not really. If we take nominal interest rate = real rates + inflation expectation + credit spread, then only the (counter party dependent) credit spread reflects riskiness. Real rates reflect an equilibrium of time preferences.
  - endtime 4y ago
    > even the most financially illiterate people know that interest rates should be vaguely proportional to risk. I estimate that approximately 80% of people would not even understand the claim you're making, let alone be able to evaluate how true it is.
  - TheOtherHobbes 4y ago
    A lot of people still haven't figured out that crypto is a psychological hack, not a technological or a financial one. It's just virtual tulip bulbs and South Sea Company shares. And that's all it's ever been. The fraud is the point. It's not an unfortunate, isolated, and regrettable accident. Crypto literally raises the cost of borrowing by making it trivially easy for fraudsters to steal it, under the cover of running a "secure exchange" or a global high profile pump and dump, or worthless NFTs, or whatever the next scam du jour is.
    - unyttigfjelltol 4y ago
      Well, sort of. Crypto-- done well-- is supposed to represent banking as a SaaS. The existence of these electronic exchanges demonstrated the failure of that function. It just wasn't practical or even possible to transfer value without the involvement of these shady characters. After removing "banking as SaaS" from the value proposition, what was left was a bunch of hustlers running cleverly incentivized Ponzi schema. It's not even tulip bulbs. We're finding its black boxes, creative financing and yield farming as far as the eye can see.
    - roneythomas6 4y ago
      Ultimately none of these things produce anything of value and all they do is trade money in circle. Ultimately the money has to leave system. Right now there is less money in the system than it did before. I guess soon enough we will find many people cannot leave the system. This is the reason why Binance CZ announced the 1 billion crypto recovery fund to stop spreading contagion.
psychlops 4y ago
> the key innovation of crypto is that it's supposed to reduce the risk of lending by bringing realtime transparency to the assets and liabilities of borrowers Never heard this definition, where did you read this? Any time the word "asset" is linked to a crypto, people should know by now it's eventually going to zero.
- Alex3917 4y ago
  > Never heard this definition, where did you read this? I mean literally the reason why everyone refers to crypto as "triple entry accounting" is because entries on the ledger are cryptographically signed, which makes ledgers less expensive to audit and also prevents certain categories of fraud. So that alone should always make the costs of lending on the blockchain lower, and therefore also reduce interest rates. But if you want a much more detailed explanation of why crypto should reduce the cost of borrowing money, especially in the developing world, here is an extremely detailed explanation on this topic: https://www.youtube.com/watch?v=dla42bY7k90 https://www.youtube.com/watch?v=dla42bY7k90
  - akiselev 4y ago
    I can see it clearly now - the next crypto crash rolling around like clockwork. Except this time it’ll be a speed run through four centuries of debtors law in which the cryptobros realize that the reason for interest rates isn’t the transaction cost or the paperwork but the enforcement arm to get people to complete the whole transaction through to the end. I think it’ll come in two phases: first they’ll come around to the idea of debtor’s prisons and demand the governments of the world bring them back. Then when they’re all in the prisons, they’ll lead a movement to abolish them (again) completing the circle of “why bother?” In the end we’ll be left with a saturated market of repo companies picking up the pieces for pennies on the dollar.
    - em_te 4y ago
      > the cryptobros realize that the reason for interest rates isn’t the transaction cost or the paperwork but the enforcement arm to get people to complete the whole transaction through to the end. It's interesting you brought that up because crypto has a similar mechanism to get people to complete the whole transaction and resolve disputes without involving interest rates. For example, imagine person B was buying a product from A. Should A send the product first or should B pay first. When both sides don't want to take the initiative, they use an escrow contract on the blockchain where both sides have to lock up 150% to 200% of the value of the product in crypto inside the contract. A then sends the product. B receives the product. If B accepts the state of the product, he can press a button to release the relevant amount of crypto in the contract to A and refund the extra 50% to 100% he had to put up. If B sees the product is fraud, he presses another button and both sides lose all their crypto. This disincentives both A and B from committing fraud. There are more nuanced conditions involved so I won't bore you with the details, but the main concept is there and it doesn't involve interest rates.
awinder 4y ago
“The answer might be that every crypto exchange has a 15% or higher chance of exploding per year and they've all just been extremely lucky” Nailed it!
lancesells 4y ago
> If the key innovation of crypto is that it's supposed to reduce the risk of lending by bringing realtime transparency to the assets and liabilities of borrowers, then why was FTX paying vastly higher interest rates than traditional banks? What I hear from people who invest in crypto is hoping they will make money on it. Maybe that technology is part of it but I've only known people that want to invest in it for a greater return. It's thought of as a stock, but unlike a regular stock there is no company behind it that produces something of value. It's a made up digital collectible spawned from the mind of boy geniuses that is literally nothing. My recommendation for investing in collectibles is comic books, trading cards, etc. They are finite, they exist, and they are not propped up by VC money.
- MrMan 4y ago
  also art and wine
- lordfrito 4y ago
  > It's a made up digital collectible spawned from the mind of boy geniuses that is literally nothing. Wow this got me thinking... like all collectibles the value is not intrinsic in the item itself, but subjective to the eye of the beholder. What exactly is the subjective thing that's being collected here? I wonder if the appeal of crypto is that literally represents (well, as literal as a digital good can be) a piece of "the digital new", whatever that may be. It's a piece of the our perceived digital future, but one you can own and say is yours. This must strongly resonate at a subconscious level to those weaned on social media who now live in a state of constant anxiety due to FOMO. The digital world is ephemeral, but bitcoin is something you can hold on to. The average person doesn't understand the digital revolution and the world it's built and are discontent as they feel left out it's promise; namely a techno utopia that brings great wealth and power to those in the know (Gates/Jobs/Zuckerbergs/etc.). Crypto therefore allows these people to believe they own a piece of the action. That may be it's only appeal. They can point to it and say it's theirs. "I don't understand it, but I'm not going to be left out of it." It is the ultimate nexus of everything wrong with social media and the modern digital world. The future is coming, everyone else on my feed is having fun and smiling, and vast riches await you too if you only have Diamond Hands and HODL, which ensures you will never experience FOMO. A collectible that acts as a balm against all the anxieties of the modern world. Snake oil as a collectible. I must think on this further.

DiggyJohnson 4y ago

I’m not in total disagreement with your point, and, frankly, I’m glad that you made it. But how would you respond to the argument: those that lost money in FTX weren’t consciously in on the con, but instead had (vastly) exaggerated expectations about the future of crypto?

Alex3917 4y ago
> those that lost money in FTX weren’t consciously in on the con, but instead had (vastly) exaggerated expectations about the future of crypto? I've said multiple times on HN that I consider blockchain to be the most economically important invention of the last 500 years, e.g.: https://news.ycombinator.com/item?id=14633148 https://news.ycombinator.com/item?id=14633148 https://news.ycombinator.com/item?id=18574399 https://news.ycombinator.com/item?id=18574399 But the reason it's exciting is, among other things, because it should radically drive down the cost of borrowing money. So yeah, I'm probably literally on the most bullish person on crypto on HN, but that's why it's so easy for me to see how the folks chasing those double digit interest rates on FTX aren't exactly the innocent victims they're being portrayed as. I'm hardly an economist, but even the most financially illiterate people know that interest rates should be vaguely proportional to risk.
- FabHK 4y ago
  > interest rates should be vaguely proportional to risk. Not really. If we take nominal interest rate = real rates + inflation expectation + credit spread, then only the (counter party dependent) credit spread reflects riskiness. Real rates reflect an equilibrium of time preferences.
- endtime 4y ago
  > even the most financially illiterate people know that interest rates should be vaguely proportional to risk. I estimate that approximately 80% of people would not even understand the claim you're making, let alone be able to evaluate how true it is.
- TheOtherHobbes 4y ago
  A lot of people still haven't figured out that crypto is a psychological hack, not a technological or a financial one. It's just virtual tulip bulbs and South Sea Company shares. And that's all it's ever been. The fraud is the point. It's not an unfortunate, isolated, and regrettable accident. Crypto literally raises the cost of borrowing by making it trivially easy for fraudsters to steal it, under the cover of running a "secure exchange" or a global high profile pump and dump, or worthless NFTs, or whatever the next scam du jour is.
  - unyttigfjelltol 4y ago
    Well, sort of. Crypto-- done well-- is supposed to represent banking as a SaaS. The existence of these electronic exchanges demonstrated the failure of that function. It just wasn't practical or even possible to transfer value without the involvement of these shady characters. After removing "banking as SaaS" from the value proposition, what was left was a bunch of hustlers running cleverly incentivized Ponzi schema. It's not even tulip bulbs. We're finding its black boxes, creative financing and yield farming as far as the eye can see.
  - roneythomas6 4y ago
    Ultimately none of these things produce anything of value and all they do is trade money in circle. Ultimately the money has to leave system. Right now there is less money in the system than it did before. I guess soon enough we will find many people cannot leave the system. This is the reason why Binance CZ announced the 1 billion crypto recovery fund to stop spreading contagion.

psychlops 4y ago

> the key innovation of crypto is that it's supposed to reduce the risk of lending by bringing realtime transparency to the assets and liabilities of borrowers Never heard this definition, where did you read this? Any time the word "asset" is linked to a crypto, people should know by now it's eventually going to zero.

Alex3917 4y ago
> Never heard this definition, where did you read this? I mean literally the reason why everyone refers to crypto as "triple entry accounting" is because entries on the ledger are cryptographically signed, which makes ledgers less expensive to audit and also prevents certain categories of fraud. So that alone should always make the costs of lending on the blockchain lower, and therefore also reduce interest rates. But if you want a much more detailed explanation of why crypto should reduce the cost of borrowing money, especially in the developing world, here is an extremely detailed explanation on this topic: https://www.youtube.com/watch?v=dla42bY7k90 https://www.youtube.com/watch?v=dla42bY7k90
- akiselev 4y ago
  I can see it clearly now - the next crypto crash rolling around like clockwork. Except this time it’ll be a speed run through four centuries of debtors law in which the cryptobros realize that the reason for interest rates isn’t the transaction cost or the paperwork but the enforcement arm to get people to complete the whole transaction through to the end. I think it’ll come in two phases: first they’ll come around to the idea of debtor’s prisons and demand the governments of the world bring them back. Then when they’re all in the prisons, they’ll lead a movement to abolish them (again) completing the circle of “why bother?” In the end we’ll be left with a saturated market of repo companies picking up the pieces for pennies on the dollar.
  - em_te 4y ago
    > the cryptobros realize that the reason for interest rates isn’t the transaction cost or the paperwork but the enforcement arm to get people to complete the whole transaction through to the end. It's interesting you brought that up because crypto has a similar mechanism to get people to complete the whole transaction and resolve disputes without involving interest rates. For example, imagine person B was buying a product from A. Should A send the product first or should B pay first. When both sides don't want to take the initiative, they use an escrow contract on the blockchain where both sides have to lock up 150% to 200% of the value of the product in crypto inside the contract. A then sends the product. B receives the product. If B accepts the state of the product, he can press a button to release the relevant amount of crypto in the contract to A and refund the extra 50% to 100% he had to put up. If B sees the product is fraud, he presses another button and both sides lose all their crypto. This disincentives both A and B from committing fraud. There are more nuanced conditions involved so I won't bore you with the details, but the main concept is there and it doesn't involve interest rates.

awinder 4y ago

“The answer might be that every crypto exchange has a 15% or higher chance of exploding per year and they've all just been extremely lucky” Nailed it!

lancesells 4y ago

> If the key innovation of crypto is that it's supposed to reduce the risk of lending by bringing realtime transparency to the assets and liabilities of borrowers, then why was FTX paying vastly higher interest rates than traditional banks? What I hear from people who invest in crypto is hoping they will make money on it. Maybe that technology is part of it but I've only known people that want to invest in it for a greater return. It's thought of as a stock, but unlike a regular stock there is no company behind it that produces something of value. It's a made up digital collectible spawned from the mind of boy geniuses that is literally nothing. My recommendation for investing in collectibles is comic books, trading cards, etc. They are finite, they exist, and they are not propped up by VC money.

MrMan 4y ago
also art and wine
lordfrito 4y ago
> It's a made up digital collectible spawned from the mind of boy geniuses that is literally nothing. Wow this got me thinking... like all collectibles the value is not intrinsic in the item itself, but subjective to the eye of the beholder. What exactly is the subjective thing that's being collected here? I wonder if the appeal of crypto is that literally represents (well, as literal as a digital good can be) a piece of "the digital new", whatever that may be. It's a piece of the our perceived digital future, but one you can own and say is yours. This must strongly resonate at a subconscious level to those weaned on social media who now live in a state of constant anxiety due to FOMO. The digital world is ephemeral, but bitcoin is something you can hold on to. The average person doesn't understand the digital revolution and the world it's built and are discontent as they feel left out it's promise; namely a techno utopia that brings great wealth and power to those in the know (Gates/Jobs/Zuckerbergs/etc.). Crypto therefore allows these people to believe they own a piece of the action. That may be it's only appeal. They can point to it and say it's theirs. "I don't understand it, but I'm not going to be left out of it." It is the ultimate nexus of everything wrong with social media and the modern digital world. The future is coming, everyone else on my feed is having fun and smiling, and vast riches await you too if you only have Diamond Hands and HODL, which ensures you will never experience FOMO. A collectible that acts as a balm against all the anxieties of the modern world. Snake oil as a collectible. I must think on this further.