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BlockFi files for bankruptcy as FTX fallout spreads

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Re: BlockFi files for bankruptcy as FTX fallout spreads

#201

Post by bena »

aww_dang wrote: post #132
bena wrote: post #57

Earlier quoted context omitted.

Eh. Words are going to word. People conflate ponzi schemes and pyramid schemes as well. However, I'm having trouble finding where it is not. Money paid out must come from new investors. If I buy crypto for $1, I need someone willing to buy it for $2 to make money. My returns come not from any utility, but from more people investing in it.

If I buy a baseball card for $1, I need someone to buy it for $2 to make money. If I trade lumber on a commodities market, I need someone to buy it at a higher price to make money. The new entrants condition does not qualify anything as ponzi scheme. Words should have meaning, or else what are we even talking about? A ponzi is a specific form of fraud where the promoter misrepresents where the profits are coming from…

Collectibles are their own thing. I'll allow that there is some value in the preservation of the item itself. But the reality is that with collectibles, it's the scarcity that's the thing. And with digital goods, scarcity is artificial.

Your lumber comparison is vastly over-simplifying an issue to make it look similar. Lumber is useful. It has value as a building material.

I've yet to see a cryptocurrency/NFT/whatever that has any value outside of its own ecosystem. I also like how you say the "new entrants condition does not qualify anything as a ponzi scheme" before pasting the definition which says "the promoter pays out current investors with the money of new investors".

Which is how crypto works. That's the only source of increased value, new investors. The only quibble is that there's not a single promoter. In which case, fine. Crypto is not a ponzi scheme. Crypto is a vehicle by which people can easily create a whole bunch of ponzi schemes.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#202

Post by babypuncher »

Auracle wrote: post #51
ARandomerDude wrote: post #15

Earlier quoted context omitted.

That sounds nice in theory, but of course these companies are free to sit down and hammer out professional standards without the government telling them to. "We really want to be told what to do but nobody will" is code for "I'm not doing anything until the government makes me, and I'll redirect blame to the glacially slow government the whole time."

That’s easy to say, but that’s going to make those companies uncompetitive. Look at how fast FTX overtook Coinbase, a long established player that - as far as anyone can tell - isn’t doing anything shady.

This worked really well for banks in the early 20th century

Re: BlockFi files for bankruptcy as FTX fallout spreads

#203

Post by ihumanable »

jb12 wrote: post #71
solotronics wrote: post #47

Bitcoiners have been saying this whole time not to keep your crypto with a 3rd party and this is exactly why. Satoshis original message about Bitcoin mentions explicitly you don't need any trusted third party. A whole lot of people think they can make money outsmarting the original concepts of Bitcoin and they get scammed in new ways each cycle. https://nakamotoinstitute.org/trusted-third-parties/

Do you think self-custody is simple enough for mass adoption by non-technical users?

The internet at large says no.

People won't run their own mail exchange, because it's too much work and too complicated.

People won't run their own blog, because it's too much work and too complicated.

The downside to doing either of these things poorly is that you can't send email / become a spam email relay / get hacked and lose your blog content.

Now tell those people that they can take on all the downside risk of losing all their money and the only thing they have to do to make sure that doesn't happen is practice perfect operational security, perfect transaction discipline, stay up to date on all known exploits and patches, constantly be on guard for irreversible scams and exploits, and the big benefit is, "you don't have to trust the bank."

Some huge percent of those people are going to look at you like you are crazy. Do all this work, take on this massive risk, and for what, a problem that most people in the western world have never faced. Most people have not faced any issue with transacting with the traditional finance system, definitely not enough to take on all the labor and risk of being their own bank.

If people won't run their own email, they aren't going to run their own financial institution.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#204

Post by babypuncher »

aww_dang wrote: post #154
nscalf wrote: post #9

For what it's worth, all reasonable people in the crypto space want regulation to make sure these types of poor lending practices don't continue. Regulators have been slow and ineffective when it comes to crypto, which has lent itself to the crypto v SEC narrative, but all the adults in the room known there is a need for some regulation.

The market is punishing bad actors with insolvency. Yet somehow the conclusion is that markets are not effective in self-regulation.

When the market punishes bad actors like this there tends to be a lot more fallout.

Government regulations can help limit the blast radius or avoid them altogether.

In 1929 the free market punished the banks for their bad behavior and everyone suffered a decade long depression because of it.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#205

Post by awinder »

TacticalCoder wrote: post #178
woodruffw wrote: post #86

Earlier quoted context omitted.

Given the amount of handwringing we've seen over the past couple of weeks in re: Twitter's headcount, it astonishes me that we haven't seen anything close to that for these cryptocurrency firms. Twitter ran one of the world's largest social media networks with around 7000 people; what in the world is Kraken doing with ~3400[1]? [1]: https://www.linkedin.com/company/krakenfx

> what in the world is Kraken doing with ~3400 Kraken is one of the OG cryptocurrencies exchange. Maybe the oldest still around. They're in the business since 2013 or so. Since then the Crypsy, Quadriga, Mt Gox, FTX, etc. have all come and gone (with their customers' money) but Kraken is still there. If they are on a scam, it's a really long con: a decade and a half of a con? They're not "Binance big" but they do nea…

3400 employees at 1.4B revenue (2021) is not great, it’s lower than twitters per employee ratio which was also not great. Amongst financials that headcount-to-revenue is pretty abysmal.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#206

Post by Haga »

graeme wrote: post #184
gumby wrote: post #155

Earlier quoted context omitted.

> Unbelievable the amount of destruction of value here Destruction of value or destruction of paper wealth? I'm pretty cynical of the whole crypto* space, mainly because I think the people making any money in it are themselves cynical and predatory. I suppose that billion dollars of investment was actual cash lost. * Using the new definition, not cryptography, which is what the term really means and will again soon.

Both. If you take 900 reasonably skilled people and direct them towards nonsense for a few years, that is definite value lost to society. It sounds like $1 billion in actual cash was lost this way. And the buildings they were in could have housed useful activity, the computers they bought could have done useful things, etc. Those people could have been doing useful things. And it sounds like their activities were wor…

It's a whole societal trend, away from real progress towards virtual gambling. I would trade the whole crypto currency space in for one well financed fusion research project.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#207

Post by matai_kolila »

solotronics wrote: post #47

Bitcoiners have been saying this whole time not to keep your crypto with a 3rd party and this is exactly why. Satoshis original message about Bitcoin mentions explicitly you don't need any trusted third party. A whole lot of people think they can make money outsmarting the original concepts of Bitcoin and they get scammed in new ways each cycle. https://nakamotoinstitute.org/trusted-third-parties/

The whole point of keeping your crypto with BlockFi was how much interest they were paying out.

But yeah, this whole debacle with FTX has finally made me realize that if I were to ever keep meaningful quantities of crypto, I would need to do so in a cold wallet.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#208

Post by itake »

blockfiuser0102 wrote: post #141
itake wrote: post #112

Earlier quoted context omitted.

> users should be educated about the benefits of choosing self custody and decentralized exchanges over unregulated and opaque services. Are there any "self custody" or "decentralized exchanges" that offer 8% interest on deposits? I think you are comparing apples and oranges here. disclaimer: I am a current 3-figure BlockFi depositor

yes there are dozens of decentralized protocols that claim to offer high yield. but few can really sustain that in reality. safer to not chase such high yield.

My understanding of the "high yield" options don't pay out in stable coins. At best, they are vulnerable to impermanent loss and worse the smart contracts get outsmarted with all the coins gone. Staking crypto has lockin periods, whereas blockfi had no lockin period.

Can you share an example of a decentralized protocol that offers high yield in a stable coin with less risk than blockfi offered?

Re: BlockFi files for bankruptcy as FTX fallout spreads

#209

Post by skorpeon87 »

Mistletoe wrote: post #97
woodruffw wrote: post #86

Earlier quoted context omitted.

Given the amount of handwringing we've seen over the past couple of weeks in re: Twitter's headcount, it astonishes me that we haven't seen anything close to that for these cryptocurrency firms. Twitter ran one of the world's largest social media networks with around 7000 people; what in the world is Kraken doing with ~3400[1]? [1]: https://www.linkedin.com/company/krakenfx

Kraken actually handles money so it needs customer service and Twitter is just a bunch of already written code for posting stuff and sometimes (although much less now!) getting ad dollars. What do (did) 7000 people do at Twitter? I hate to ask the question because it aligns me with Elon whom I despise right now. But what do all the employees do at tech companies? I thought the beauty of tech and why the valuations we…

> What do (did) 7000 people do at Twitter?

I don't know, but Discord has a small fraction of the employees. They have hundreds of millions of active users, handle tons of live audio streams in addition to the text traffic, and their client software has a lot more features than twitter. Why can Discord do more with less?

Re: BlockFi files for bankruptcy as FTX fallout spreads

#210

Post by jtbayly »

dehrmann wrote: post #121
darawk wrote: post #34

Earlier quoted context omitted.

I think the true answer to this question is that it was/is a gold rush with low interest rates that led large amounts of capital to be allocated to less than competent people. In particular, the companies and operators that look the smartest when a bubble is inflating are the ones that genuinely hedge downside risk the least, while pretending to enough to fool people with capital to allocate. This only becomes appare…

> normal tech has already found its use cases and does real things for real people in the real economy For all the problems with gig economy companies, they're not crypto. Uber fell from its high, but it's still facilitating rides and deliveries.

And still loses money, right?
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