Rob—thanks for a very reasonable take. Well written. Feeling appalled about FTX seems fully warranted, given the information we have so far.
To nitpick one point: I’m less skeptical about crypto in general. In terms of fraud detection, I think the public nature of blockchain ledgers and the traceability of tokens and addresses arguably helped to catch the FTX fraud (as it seems to have been) earlier than it might have otherwise been caught in traditional finance context. (IIRC, the initial reports that alerted CZ at Binance to FTX/Alameda problems were based on analyzing on-chain data, i.e. details of the public ledgers for various crypto protocols.)
Some centralized exchanges such as Kraken already do regular ‘proof of reserves’ audits that prove the status of investor deposits (which would have prevented the FTX crisis). Many other exchanges, including Binance, have committed this week to adopting proof-of-reserves systems soon. Oracle protocols such as Chainlink should soon allow proof-of-reserves systems for exchanges to operate continuously, in real time, rather than just a few times a year.
Long story short, blockchain technology involves public ledgers that, in principle, should allow real-time, publicly verifiable, highly transparent audits for tracking and verifying investor funds. This is in contrast to traditional finance, where depositors and investors typically have no idea at all whether banks, asset exchanges, hedge funds, pensions, or other entities actually have the assets that they claim to have—given that ‘independent auditors’ and government regulators can often be cajoled, lobbied, or bribed to report whatever the financial institutions want them to say (as we saw in the 2008 crisis).
So, although crypto seems like the wild west at the moment, in terms of the lack of coherent regulations, the complexity of the financial technology, and the youth and inexperience of many of the leaders, it has the potential to create a much more open, transparent, auditable, and reliable financial system than the traditional financial institutions are running.
Fair point. I understand OP’s post was more of a vent (mine coming soon), but he should’ve expanded more of his reason and evidence for calling blockchain a “Ponzi scheme.”
(Side note: By no means am I a one of these “crypto bros.” I have as little money invested in it as you’d expect any other average Hispanic son of immigrants and recent community college graduate would. I’d say I’m neutral when it comes to crypto.)
You said, “ Some people are saying this is no surprise, as all of crypto was a Ponzi scheme from the start.” if you’re willing enough to post other people’s opinions, then you agree with it to an extent.
And then you further try to support this connotation of crypto and Ponzi scheme by saying “some Ponzi schemes have been operated there I’m sure.”
As stated earlier, I’m not taking sides on if crypto is a net good or net bad, but let’s be honest and straightforward on our said statements. And not try to redefine our noted statements to save face.
I have an idea: ppl trying to boost crypto should disclose their current crypto holdings, lifetime profit/loss, and how big a % of their net worth they’re in for. Show us your bags and then we can talk.
Rob—thanks for a very reasonable take. Well written. Feeling appalled about FTX seems fully warranted, given the information we have so far.
To nitpick one point: I’m less skeptical about crypto in general. In terms of fraud detection, I think the public nature of blockchain ledgers and the traceability of tokens and addresses arguably helped to catch the FTX fraud (as it seems to have been) earlier than it might have otherwise been caught in traditional finance context. (IIRC, the initial reports that alerted CZ at Binance to FTX/Alameda problems were based on analyzing on-chain data, i.e. details of the public ledgers for various crypto protocols.)
Some centralized exchanges such as Kraken already do regular ‘proof of reserves’ audits that prove the status of investor deposits (which would have prevented the FTX crisis). Many other exchanges, including Binance, have committed this week to adopting proof-of-reserves systems soon. Oracle protocols such as Chainlink should soon allow proof-of-reserves systems for exchanges to operate continuously, in real time, rather than just a few times a year.
Long story short, blockchain technology involves public ledgers that, in principle, should allow real-time, publicly verifiable, highly transparent audits for tracking and verifying investor funds. This is in contrast to traditional finance, where depositors and investors typically have no idea at all whether banks, asset exchanges, hedge funds, pensions, or other entities actually have the assets that they claim to have—given that ‘independent auditors’ and government regulators can often be cajoled, lobbied, or bribed to report whatever the financial institutions want them to say (as we saw in the 2008 crisis).
So, although crypto seems like the wild west at the moment, in terms of the lack of coherent regulations, the complexity of the financial technology, and the youth and inexperience of many of the leaders, it has the potential to create a much more open, transparent, auditable, and reliable financial system than the traditional financial institutions are running.
Fair point. I understand OP’s post was more of a vent (mine coming soon), but he should’ve expanded more of his reason and evidence for calling blockchain a “Ponzi scheme.”
(Side note: By no means am I a one of these “crypto bros.” I have as little money invested in it as you’d expect any other average Hispanic son of immigrants and recent community college graduate would. I’d say I’m neutral when it comes to crypto.)
I did not call blockchain a Ponzi scheme (though some Ponzi schemes have been operated there I’m sure).
I said some others are saying it’s a Ponzi scheme at heart, while I “am pretty skeptical of crypto having many productive applications.”
You said, “ Some people are saying this is no surprise, as all of crypto was a Ponzi scheme from the start.” if you’re willing enough to post other people’s opinions, then you agree with it to an extent.
And then you further try to support this connotation of crypto and Ponzi scheme by saying “some Ponzi schemes have been operated there I’m sure.”
As stated earlier, I’m not taking sides on if crypto is a net good or net bad, but let’s be honest and straightforward on our said statements. And not try to redefine our noted statements to save face.
I have an idea: ppl trying to boost crypto should disclose their current crypto holdings, lifetime profit/loss, and how big a % of their net worth they’re in for. Show us your bags and then we can talk.