really, your concerns are why bitcoin was invented. the 2008 financial crisis showed that wall street was just taking people’s words for how much their assets are worth. a bundled derivative with lots of shitty loans and some good loans and other stuff is worth some number that’s up to interpretation. the balance of a bitcoin account is not up to any interpretation, it is there out in the open.
and so it’s ironic that ftx would claim to be about crypto but actually it was a 2008-style black box investment bank leveraged to the tits and holding junk assets. the whole debacle for me proves the use case for crypto in the future
my worry is that our legislature will read the situation wrong, and make a law like, “you can’t do anything with blockchain, it’s too dangerous”. sam was lobbying hard, and idk if he was exactly lobbying for an open system in which people are actually using a blockchain where he can’t lie about how much he has in his account (considering his situation)
Any unregulated business is going to be dominated by fraud, period. Going on about the potential of crypto as free from government is completely laughable at this point.
But even more fundamentally, the “asset” doesn’t produce anything. There is no cash flow. It’s only real use is facilitating crime. You can spew all kinds of libertarian-adjacent nonsense but at the end of the day there’s a reason everyone in this industry can’t wait to covert their bounty to actual US dollars.
I can see this argument and agree this is where the potential value of all blockchain/crypto/decentralized finance (“BCDF”) resides. But what nags at me is the following: If we assume that BCDF or more specifically Bitcoin was invented as a reaction to the wrongs of the financial crisis, then we would expect that this innovation would be used to overcome the wrongs of the financial crisis. But the core issues of the 2008 FC - namely, assets being assigned higher credit rating than they deserved, and having commensurately overstated asset prices - are not at all addressed by Bitcoin. The fact that the Bitcoin ledger - a record of transactions - is open source and decentralized is a good thing, but that wasn’t the problem in 2008. In 2008 investment banks did not make errors or commit fraud in their records of transaction. The problems were pricing problems. I’ve never seen a description of how BCDF contributes to better pricing. But there is a lot I don’t know. Having said that, the financial industry actually does know the solution to the 2008 FC - it’s more old fashioned boring regulation and stress testing, independent oversight, and auditing. Not sexy stuff, but effective.
So, I’m not a virulent hater of BCDF, I admit that there is an awful lot I don’t know, but I also have decades of experience in the financial industry including time as a financial product developer, a financial product dealer, and even a stint as an asset manager’s chief compliance officer. While I have a lot to learn about Bitcoin and other crypto related and DeFi products and concepts, I have an earned confidence about what financial bullshit looks like, what the rules and processes are that protect financial market participants from harm, and how those things work in practice. I think this experience is both a blessing and a curse - on the one hand I do really think that my BS instincts are strong, on the other hand I admit that years and years working with and for institutional asset managers will make a person conservative. We’re basically trained to look for yellow flags and red flags, and anything with a red flag is a simple no full stop. An example of this is weak or non-existent controls or audits.
Look, if you’re going to require audited financial statements, then how am I supposed to know what an entity’s perceived leverage is? Those dorky auditors aren’t going to allow a firm to report that metric.
FTX US was supposedly subject to US regulations and no one lost money right?
But apparently you could use to a VPN to get around that and put money regular (definitely not a) ponzi FTX. So I’m guessing there was some juicy stuff in regular FTX that you couldn’t get in FTX US?
