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I am unsure if you are knowledgable about the situation with FTX given your comments. However, I do want to hear your opinion. Could you share what was broken a

by dmak 4y ago

I am unsure if you are knowledgable about the situation with FTX given your comments. However, I do want to hear your opinion. Could you share what was broken about crypto in this FTX case?

JKCalhoun 4y ago
I know this is going to sound heretical but perhaps crypto is broken because it is not regulated. Exhibit A: FTX
- dmak 4y ago
  To be fair, FTX isn't a result of crypto being unregulated. Operating an exchange is regulated to some extent, but this is a story of failed corporate governance amongst many other things.
  - twawaaay 4y ago
    FTX is exactly because of it being unregulated or where there was regulation -- it being absolutely inadequate and ineffective. Any sane regulator would not allow the shit happening that happened in FTX. This is not a company making bad business decisions. This is company making bad criminal decisions with the money they did not own and were not free to do what they pleased and creating impression of value in a fraudulent way.
  - lordfrito 4y ago
    "Failed corporate governance" is the root of most crimes like this. It just means that no one was watching the hen house. What's criminal here is that it wasn't just failed governance, there was literally no governance. They comingled funds (it's just a big pile of cash, right?) and didn't even consider risk. [1] This is what happens when Scooby and The Gang run a hedge fund. Zoiks! The point of regulation is that it ensures that companies have frameworks like this in place, and that the actors are playing fairly. Mainly because we can't trust some people among us to not take advantage of having access to other peoples money. You can't build a civilization on the back of "Trust me bro I'm good for it". Think about it, why do people regularly hand over their money to their bank, when they've never met the people actually running it? We trust that if we put money in, that later it will come back out. But why? It's because regulation solves the trust problem, if your bank is FDIC insured you're covered. Thanks government! Yes regulation is an evil, but a necessary evil. It's a tax on everyone because some people can't be trusted with the keys to the bank vault. The government ties their hands, that's a good thing. It's harder to raid the cookie jar with one hand tied behind your back. [1] https://www.yahoo.com/video/sam-bankman-fried-said-hed-131733118.html https://www.yahoo.com/video/sam-bankman-fried-said-hed-13173...
    - dmak 4y ago
      Agreed to everything you are saying. I think the issue I have with most comments here is that they are misinformed of the issues and are just pointing a finger at the asset class even though it wasn't the cause.
      - lordfrito 4y ago
        By asset class I assume you mean crypto in general? The issue I have with this space is that lack of central/governmental control is the original selling point. Lack of regulation is a defining feature, not a bug. This is a huge red flag for me. If I was a con-artist, I'd be drawn to this space like a moth to a flame. I don't trust any of the players in this space, anyone legit would be making real $$$ in TradFi. It's the modern day junk bond. This picture summarizes the situation perfectly. Caveat emptor indeed. [1] [1] https://i.redd.it/qul2xd7anl2a1.jpg https://i.redd.it/qul2xd7anl2a1.jpg
  - topranks 4y ago
    FTX, or Coinbase or any of them, are not regulated. Not as exchanges, not as brokerages, or anything else resembling their supposed business model. They’re registered business but that’s about it.
    - dmak 4y ago
      That's not true, and I said they are regulated to an extent. They have to get their licenses and maintain certain requirements like separating client assets which is regulated by FSA depending on the country.
- twawaaay 4y ago
  I think this begs an explanation. The reason people detest regulation is because a) people detest the government and b) people think regulators are corrupt and/or ineffective. But what people are doing is incorrectly extrapolating from one aspect of the problem and then falling into a trap of a logical fallacy. It goes something like this: The government or the regulator is corrupt and/or ineffective therefore regulation is bad. If regulation is bad then no regulation must be good. Well, in fact what the government does (at least to some extent, at least in some countries) is it takes care after its citizens. Even if this care is not distributed justly, equally, efficiently and competently it is still the fact that most citizens are way better off having the government than not having it. Of course this doesn't mean we should stop pushing government to do better. Similar happens in financial world -- people dislike regulation for all its failing but the truth is that great majority of financial players by numbers are better off with regulation than without it. By numbers, most players in financial markets are simple people who invest money for retirement but don't have enough knowledge to protect themselves from financial predators. Case in point: crypto. Where regulation is thin or non existent and people get robbed blind right and left by organisations who have knowledge and resources to build schemes to extract wealth from smaller players that can't defend themselves. If you are like me, saving your money for retirement, you absolutely want regulation. Regulation is your friend -- this is some government weight trying to make sure that at least some rules are respected at least most of the time. There are financially savvy people who will do well regardless. Regulation does not affect them much -- they will make money regardless. Regulation is for small people like you or me trying to save up a bit and not loose it, because without regulation you are bound to loose the money sooner or later. Or you will pay dearly to protect your assets to the point where it is difficult to accumulate any wealth on your own.
  - dmak 4y ago
    I agree regulations is good and I am for it. However, all of your comments are just pointing a finger at cryptocurrency as the cause of the issues here when it's not. Your arguments might be valid in other discussions, but your premise is misinformed. The FTX fallout wasn't not a result of the asset class in question. It was much more than that. Even IF crypto had regulations, it wouldn't have been able to prevent the blatant fraud and criminal activities that happened in FTX. I would really suggest you to read more about it first. You can learn about it in this video here which covers the key points: https://www.youtube.com/watch?v=l3HfrRjWilQ https://www.youtube.com/watch?v=l3HfrRjWilQ Here is another commenter who also talks about it: https://news.ycombinator.com/item?id=33879829 https://news.ycombinator.com/item?id=33879829
- sumtechguy 4y ago
  Crypto could totally be a currency. The fact of the matter is that it sort of is. In its most raw terminology of currency. It is not however an insured currency. So you will get all the fun things you get with that. Massive inflation/deflation, bank runs, sudden insolvency, probable scams, etc. Our current currency system is the way it is precisely of what you are seeing in real time in 'crypto'. These sorts of things happened many times before our central banks got involved and regulated them. If you want to see some real shenanigans read about the banks from the 1800s. History does not repeat itself but it sure rhymes. I was not surprised it happened. The only thing that surprised me is that it took this long for someone to make an enron sized mistake. The macro econ guys should have a ton of fun and probably a few papers out of it. As it looks like in addition to the probable fraud here there may be some new things to learn about monetary systems. In this case how crypt might actually be very tied to existing monetary systems they seek to get rid of. Which is an interesting result that crypto was promising to end.
  - dmak 4y ago
    The issue wasn't cryptocurrency itself though. The issue was that FTX was investing into companies and they were essentially trying to run a fractional reserve against their own client assets. Those issues would happen regardless of the asset class.
    - sumtechguy 4y ago
      No arguments. Crypto is a form of payment system, if we want it or not. It is however an unregulated and uninsured currency system that may or may not have actual capital backing it up (depending on the coin). My point is you will see wild swings of interesting things happening precisely because of the unregulated nature of it. This is not 'new' because of crypto. It has happened before, it will happen again. Regulation also does not necessarily means 'it will not happen'. It usually just slows it down enough to catch it before it gets wildly out of hand. Also as a payment system crypto is interesting, as many people seem to be using it as an investment vehicle precisely because of those wild swings.

by dmak 4y ago

I am unsure if you are knowledgable about the situation with FTX given your comments. However, I do want to hear your opinion. Could you share what was broken about crypto in this FTX case?

JKCalhoun 4y ago

I know this is going to sound heretical but perhaps crypto is broken because it is not regulated. Exhibit A: FTX

dmak 4y ago
To be fair, FTX isn't a result of crypto being unregulated. Operating an exchange is regulated to some extent, but this is a story of failed corporate governance amongst many other things.
- twawaaay 4y ago
  FTX is exactly because of it being unregulated or where there was regulation -- it being absolutely inadequate and ineffective. Any sane regulator would not allow the shit happening that happened in FTX. This is not a company making bad business decisions. This is company making bad criminal decisions with the money they did not own and were not free to do what they pleased and creating impression of value in a fraudulent way.
- lordfrito 4y ago
  "Failed corporate governance" is the root of most crimes like this. It just means that no one was watching the hen house. What's criminal here is that it wasn't just failed governance, there was literally no governance. They comingled funds (it's just a big pile of cash, right?) and didn't even consider risk. [1] This is what happens when Scooby and The Gang run a hedge fund. Zoiks! The point of regulation is that it ensures that companies have frameworks like this in place, and that the actors are playing fairly. Mainly because we can't trust some people among us to not take advantage of having access to other peoples money. You can't build a civilization on the back of "Trust me bro I'm good for it". Think about it, why do people regularly hand over their money to their bank, when they've never met the people actually running it? We trust that if we put money in, that later it will come back out. But why? It's because regulation solves the trust problem, if your bank is FDIC insured you're covered. Thanks government! Yes regulation is an evil, but a necessary evil. It's a tax on everyone because some people can't be trusted with the keys to the bank vault. The government ties their hands, that's a good thing. It's harder to raid the cookie jar with one hand tied behind your back. [1] https://www.yahoo.com/video/sam-bankman-fried-said-hed-131733118.html https://www.yahoo.com/video/sam-bankman-fried-said-hed-13173...
  - dmak 4y ago
    Agreed to everything you are saying. I think the issue I have with most comments here is that they are misinformed of the issues and are just pointing a finger at the asset class even though it wasn't the cause.
    - lordfrito 4y ago
      By asset class I assume you mean crypto in general? The issue I have with this space is that lack of central/governmental control is the original selling point. Lack of regulation is a defining feature, not a bug. This is a huge red flag for me. If I was a con-artist, I'd be drawn to this space like a moth to a flame. I don't trust any of the players in this space, anyone legit would be making real $$$ in TradFi. It's the modern day junk bond. This picture summarizes the situation perfectly. Caveat emptor indeed. [1] [1] https://i.redd.it/qul2xd7anl2a1.jpg https://i.redd.it/qul2xd7anl2a1.jpg
- topranks 4y ago
  FTX, or Coinbase or any of them, are not regulated. Not as exchanges, not as brokerages, or anything else resembling their supposed business model. They’re registered business but that’s about it.
  - dmak 4y ago
    That's not true, and I said they are regulated to an extent. They have to get their licenses and maintain certain requirements like separating client assets which is regulated by FSA depending on the country.
twawaaay 4y ago
I think this begs an explanation. The reason people detest regulation is because a) people detest the government and b) people think regulators are corrupt and/or ineffective. But what people are doing is incorrectly extrapolating from one aspect of the problem and then falling into a trap of a logical fallacy. It goes something like this: The government or the regulator is corrupt and/or ineffective therefore regulation is bad. If regulation is bad then no regulation must be good. Well, in fact what the government does (at least to some extent, at least in some countries) is it takes care after its citizens. Even if this care is not distributed justly, equally, efficiently and competently it is still the fact that most citizens are way better off having the government than not having it. Of course this doesn't mean we should stop pushing government to do better. Similar happens in financial world -- people dislike regulation for all its failing but the truth is that great majority of financial players by numbers are better off with regulation than without it. By numbers, most players in financial markets are simple people who invest money for retirement but don't have enough knowledge to protect themselves from financial predators. Case in point: crypto. Where regulation is thin or non existent and people get robbed blind right and left by organisations who have knowledge and resources to build schemes to extract wealth from smaller players that can't defend themselves. If you are like me, saving your money for retirement, you absolutely want regulation. Regulation is your friend -- this is some government weight trying to make sure that at least some rules are respected at least most of the time. There are financially savvy people who will do well regardless. Regulation does not affect them much -- they will make money regardless. Regulation is for small people like you or me trying to save up a bit and not loose it, because without regulation you are bound to loose the money sooner or later. Or you will pay dearly to protect your assets to the point where it is difficult to accumulate any wealth on your own.
- dmak 4y ago
  I agree regulations is good and I am for it. However, all of your comments are just pointing a finger at cryptocurrency as the cause of the issues here when it's not. Your arguments might be valid in other discussions, but your premise is misinformed. The FTX fallout wasn't not a result of the asset class in question. It was much more than that. Even IF crypto had regulations, it wouldn't have been able to prevent the blatant fraud and criminal activities that happened in FTX. I would really suggest you to read more about it first. You can learn about it in this video here which covers the key points: https://www.youtube.com/watch?v=l3HfrRjWilQ https://www.youtube.com/watch?v=l3HfrRjWilQ Here is another commenter who also talks about it: https://news.ycombinator.com/item?id=33879829 https://news.ycombinator.com/item?id=33879829
sumtechguy 4y ago
Crypto could totally be a currency. The fact of the matter is that it sort of is. In its most raw terminology of currency. It is not however an insured currency. So you will get all the fun things you get with that. Massive inflation/deflation, bank runs, sudden insolvency, probable scams, etc. Our current currency system is the way it is precisely of what you are seeing in real time in 'crypto'. These sorts of things happened many times before our central banks got involved and regulated them. If you want to see some real shenanigans read about the banks from the 1800s. History does not repeat itself but it sure rhymes. I was not surprised it happened. The only thing that surprised me is that it took this long for someone to make an enron sized mistake. The macro econ guys should have a ton of fun and probably a few papers out of it. As it looks like in addition to the probable fraud here there may be some new things to learn about monetary systems. In this case how crypt might actually be very tied to existing monetary systems they seek to get rid of. Which is an interesting result that crypto was promising to end.
- dmak 4y ago
  The issue wasn't cryptocurrency itself though. The issue was that FTX was investing into companies and they were essentially trying to run a fractional reserve against their own client assets. Those issues would happen regardless of the asset class.
  - sumtechguy 4y ago
    No arguments. Crypto is a form of payment system, if we want it or not. It is however an unregulated and uninsured currency system that may or may not have actual capital backing it up (depending on the coin). My point is you will see wild swings of interesting things happening precisely because of the unregulated nature of it. This is not 'new' because of crypto. It has happened before, it will happen again. Regulation also does not necessarily means 'it will not happen'. It usually just slows it down enough to catch it before it gets wildly out of hand. Also as a payment system crypto is interesting, as many people seem to be using it as an investment vehicle precisely because of those wild swings.