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FTX held less than $1B in liquid assets against $9B in liabilities

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Re: FTX held less than $1B in liquid assets against $9B in liabilities

#41

Post by JonathanBeuys »

partloyaldemon wrote: post #39
JonathanBeuys wrote: post #15

There should be more discussion about how to store value without counterparty risk. Most people think it is as easy as ordering a hardware wallet, following the process the wallet software suggests and - hurray! - your keys, your coins! But it is not that easy. You also have to cut the wallet manufacturer and the software developer out of the loop. I have yet to see a description on how to safely create a wallet that…

I'd recommend a PNC checking account. Solves a lot of issues related to storing value without counterparty risk.

No post body was provided.

Re: FTX held less than $1B in liquid assets against $9B in liabilities

#43

Post by SXX »

sillysaurusx wrote: post #29
mind-blight wrote: post #23

10% liquid doesn't necessarily concern me when considering a bank. But, they have many more routes to liquidity than FTX (Liam from the fed, loans from other banks, etc.). And even still, 10% isn't legal for a bank if their liquid assets are too volatile. 450 mil was in SBFs Robinhood investment, and FTX clearly didn't have any other avenues towards liquidity. 10% without an out was a predictably bad idea

FTX isn’t a bank. They aren’t supposed to operate as a fractional reserve. Coinbase would be crucified by the SEC if they did this.

FTX US wasn't doing it either. They did it outside of SEC jurisdiction.

Re: FTX held less than $1B in liquid assets against $9B in liabilities

#44

Post by salawat »

JonathanBeuys wrote: post #15

There should be more discussion about how to store value without counterparty risk. Most people think it is as easy as ordering a hardware wallet, following the process the wallet software suggests and - hurray! - your keys, your coins! But it is not that easy. You also have to cut the wallet manufacturer and the software developer out of the loop. I have yet to see a description on how to safely create a wallet that…

>But it is not that easy. You also have to cut the wallet manufacturer and the software developer out of the loop.

Better get computer literate, and better yet, cryptographically savvy. Oh, but wait, all those microprocessors have closed blob firmware, closed source designs, and you have no idea what type of higher level industry collusion (be it with regulators you disagree with, or just within themselves to ensure they maintain a niche) they have going on.

Guess you'll have to bootstrap your own hardware/firmware/software stack, and maintain it yourself.

...No, there is no /s. I'm dead serious. That's what you're proposing shakes out like.

Look, it ain't an unfamiliar sight to me. I've also seen it exploited in the other direction (industry doing everything they can to maintain their relevance to the detriment of everyone else) too many times.

What I guess I'm trying to say is: no one (in power, or to an extent abstractly) actually wants to empower people to be able to financially self-service.

Re: FTX held less than $1B in liquid assets against $9B in liabilities

#45

Post by bananapub »

aeternum wrote: post #11

"Currently, all U.S. banks are subject to a balance sheet leverage ratio, which requires them to maintain a ratio of tier 1 capital to balance sheet assets at a minimum level of 4%. In order to be well-capitalized, banks must achieve a 5% minimum leverage ratio" So FTX had an 11% leverage ratio, pretty good.

???

banks hold real life assets, that can be resold, like mortgages or loans to credit-worthy people.

they also have access to central banks, and other big banks who might recapitalise them if they have bad luck.

FTX had a bundle of funbacks, which it had also printed, and are of no intrinsic worth.

of course the liquidity and reserve requirements are different.

Re: FTX held less than $1B in liquid assets against $9B in liabilities

#46

Post by 323 »

JonathanBeuys wrote: post #15

There should be more discussion about how to store value without counterparty risk. Most people think it is as easy as ordering a hardware wallet, following the process the wallet software suggests and - hurray! - your keys, your coins! But it is not that easy. You also have to cut the wallet manufacturer and the software developer out of the loop. I have yet to see a description on how to safely create a wallet that…

It's about 200 lines of Python code to implement a Bitcoin HD (Hierarchical Deterministic) wallet using just the standard library and old-style addresses.

This will give you a 256-bit integer as the private key. You can process this further with whatever additional method you want (Shamir Secret Sharing, ...).

Obviously not for everybody, but the underlying cryptography is pretty simple.

Re: FTX held less than $1B in liquid assets against $9B in liabilities

#47

Post by Gwypaas »

JonathanBeuys wrote: post #41
partloyaldemon wrote: post #39

Earlier quoted context omitted.

I'd recommend a PNC checking account. Solves a lot of issues related to storing value without counterparty risk.

Quoted post unavailable.

  FDIC insurance is backed by the full faith and credit of the government of the United States of America, and since its start in 1933 no depositor has ever lost a penny of FDIC-insured funds.
https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corp...

Re: FTX held less than $1B in liquid assets against $9B in liabilities

#48

Post by hnews_account_1 »

JonathanBeuys wrote: post #41
partloyaldemon wrote: post #39

Earlier quoted context omitted.

I'd recommend a PNC checking account. Solves a lot of issues related to storing value without counterparty risk.

Quoted post unavailable.

From fdic insured banks, I’d imagine the answer is yes.

Re: FTX held less than $1B in liquid assets against $9B in liabilities

#49

Post by Majromax »

JonathanBeuys wrote: post #15

There should be more discussion about how to store value without counterparty risk. Most people think it is as easy as ordering a hardware wallet, following the process the wallet software suggests and - hurray! - your keys, your coins! But it is not that easy. You also have to cut the wallet manufacturer and the software developer out of the loop. I have yet to see a description on how to safely create a wallet that…

> There should be more discussion about how to store value without counterparty risk.

> Most people think it is as easy as ordering a hardware wallet, following the process the wallet software suggests and - hurray! - your keys, your coins!

What exactly is the threat model here?

To my knowledge, there's been no general compromise of truly air-gapped hardware that could only exfiltrate data by a back channel in an otherwise valid cryptographic transaction. This scenario seems to therefore imagine a targeted attack.

However, if you're storing enough value to be the subject of a targeted attack, then it would also be unwise to have the assets so concentrated in cryptocurrencies. Diversification reduces overall risk.

With cryptocurrencies as just one asset among many, the "storage" answer becomes obvious: use a law firm or financial institution that holds enough liability insurance to cover any losses arising from bad storage practices. Use the legal system, rather than evade it.

Re: FTX held less than $1B in liquid assets against $9B in liabilities

#50

Post by sillysaurusx »

SXX wrote: post #43
sillysaurusx wrote: post #29

Earlier quoted context omitted.

FTX isn’t a bank. They aren’t supposed to operate as a fractional reserve. Coinbase would be crucified by the SEC if they did this.

FTX US wasn't doing it either. They did it outside of SEC jurisdiction.

Animats disagrees. https://news.ycombinator.com/item?id=33556651

SBF being a US citizen was an angle I hadn’t considered. The US does have jurisdiction over its own citizens, even if they’re operating in other countries. So the question becomes to what extent has SBF defrauded US investors.

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