4 Comments
Dec 2, 2022Liked by Joe Golton

There was nothing Crypto in what SBF did.

He used a centralized exchange as an unregulated fractional bank, misused clients funds in order to pay for risky investments and when a bank run happened, it collapsed.

Fraud à la Madoff and collapse à la Leman.

FTX clients preferred to deposit on a centralized exchange, trusting "banksters" to hold on to it, instead of investing on decentralized exchanges using self custodial, cold wallets.

If there is anything crypto about the FTX saga is that the reason everyone knows about this (as opposed to HSBC, Deutsche Bank, Credit Suisse) is because everyone CAN see on-chain activity, and the crypto twitter can report what's happening in REAL TIME.

As for crypto "value", in general non-sovereign currency is most useful for the un and under banked, who have no access to financial services and are extracted for remittance fees in countries suffering from double digit inflation (Lebanon, Turkey, CAR, Ukraine, Venezuela, El Salvador).

For example, community inclusion coins and DAO tokens have been vital in increasing purchasing power in impoverished villages in East Africa.

Finally, a day after FTX collapsed the Federal Reserve started their CBDC trial with 5 commercial banks! (coincidence or impeccable timing?)

This leads me to think that the same regulators trashing blockchain are quietly planning to launch a Fedcoin (in the UK Britcoin) to track every transaction and permit or limit "accepted" transactions.

At the end of the day technology does nothing.

It is what people decide to do with it that matters.

I hope you found my reply helpful.

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author

Nice comments. Totally agree with you about how the big issues with FTX is that it's an exchange. And there are of course many other exchanges besides FTX.

The launch of bitcoin was based on a mathematically beautiful technology for ensuring security, but its mathematical beauty only works if used as originally intended (i.e. there is never an exchange, which brings people and trust into the mix). I think it's implausible to assume that everyday normal people with a few thousand dollars are going to spend the time learning how to do bitcoin the proper, secure way when it takes a lot less time and effort to go through an exchange.

So, in effect, a new banking system with centralized ledgers has been created around bitcoin and other cryptocurrencies, but without the regulation that exists for national currency.

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You're lack of understanding about bitcoin vs. "crypto" makes me uninterested in the rest of your opinions.

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author

Care to elaborate? Bitcoin was not specifically mentioned in the article. In its original formulation, it was technologically secure and decentralized with a built-in mechanism to ensure scarcity. It is clearly the cream of the crop compared with other cryptocurrencies. But . . . is it an inflation hedge (despite lack of central banking)? No. Is there something you can do with it that you can't do with a government-backed currency? Not really, unless you're a criminal. Does it offer protection from theft and scams? Partially, thanks to the blockchain technological underpinnings. But those who are tricked into paying someone with bitcoin for a service not rendered have less recourse than if the transaction were with a normal credit card, right? So, apart from hoping for speculative gains stemming from scarcity combined with investor enthusiasm, what is the benefit to a normal consumer of using bitcoin, as compared with using a government-backed currency?

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