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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

#281

Post by andirk »

chinathrow wrote: post #79
propter_hoc wrote: post #16

Somehow these guys peaked at about 900 employees, according to linkedin ( https://www.linkedin.com/company/blockfi ) They've raised about a billion dollars of VC - https://www.crunchbase.com/organization/blockfi-inc/investor... (note, CB lists $1.4b, of which 400M is debt from FTX, which I imagine they never got) Unbelievable the amount of destruction of value here... it's just total carnage.

> Unbelievable the amount of destruction of value here... it's just total carnage. Impressive to see that both VC money AND customer money is burnt at immense ammounts. How can these founders sleep at night?

The VC money is nothing new. Throw money at a handful of possible game-changers and see what sticks. The customers did not simply buy crypto. They gambled it. That's a gamble on top of a gamble being run by a few people in the Bahamas. What's odd is that those gambles were risky within reason, but the fallout was just pure human corruption and/or incompetence. And putting FTT on balance sheets as actual value is laughable.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#282

Post by xur17 »

joebob42 wrote: post #152
aww_dang wrote: post #132

Earlier quoted context omitted.

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…

For baseball card I basically agree, with the main difference being you won't reliably make money on a given card. Some will go up and make you money, but realistically it's a collectible. For lumber, there is an end user who wants the lumber to e.g. make a house. There might be some middlemen who buy it and then resell it, but they are also generally providing value in some way: storing it to smooth over demand vari…

> For lumber, there is an end user who wants the lumber to e.g. make a house. There might be some middlemen who buy it and then resell it, but they are also generally providing value in some way: storing it to smooth over demand variance, doing arbitrage to improve pricing, moving it from one location to another, etc. There's never just an infinite chain of middlemen selling it for ever increasing prices.

What about something like Ethereum? There is an end user who wants the Ethereum in order to pay network fees so they can register a domain name, move a stable coin, etc. I realize this isn't the primary use, but people are betting that it will be. Is that really any different than speculating on a startup that isn't yet profitable, but could be in the future?

And since something like Bitcoin is fundamentally trying to be a currency.. Why is this any different than something like the Russian Ruble? People want it because other people want it (medium of exchange). The differences are that:

1. You're required to use it to pay taxes, or people with guns will put you in jail

2. A central party can issue unlimited amounts of the currency and give it to whoever they want

Fundamentally, why is it so crazy to have a native digital currency that isn't owned by any one entity, has a set issuance schedule, and can be used as a medium of exchange. Governments have been doing this for centuries, and now we have the technology to make an arguably "better" version. Why not at least try? The real arguments against it seem to be: people are speculating on it.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#283

Post by sebastian_z »

I was a BlockFi customer. I always had the sense that they wanted to do the right thing. They hired people with risk experience in traditional banking, had real customer support, engaged with regulators to get their interest rate product certified, etc. It is really a bit sad that they got entangled into the FTX situation. (I should also say that I withdrew my funds earlier. Otherwise, I may feel differently.)

Re: BlockFi files for bankruptcy as FTX fallout spreads

#284

Post by andirk »

tootie wrote: post #66
propter_hoc wrote: post #16

Somehow these guys peaked at about 900 employees, according to linkedin ( https://www.linkedin.com/company/blockfi ) They've raised about a billion dollars of VC - https://www.crunchbase.com/organization/blockfi-inc/investor... (note, CB lists $1.4b, of which 400M is debt from FTX, which I imagine they never got) Unbelievable the amount of destruction of value here... it's just total carnage.

I think this will be a major academic topic in economics for the next generation. It's not clear to me that any value was ever created. It was entirely notional. Number go up, number go down. The biggest loser in real terms is the VCs who spent money they possibly earned through real work.

I think the biggest victims are the people who held accounts that got drained. They were aware of the risk but they believed people smarter than them at least checked that the bank vault wasn't build on quicksand. VCs have access and ability to do due diligence and they didn't because they're blinded by their own awesomeness.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#286

Post by Eisenstein »

lottin wrote: post #162
jrm4 wrote: post #64

Earlier quoted context omitted.

So I'm a nerd interested in this stuff and I have specific ideas -- but I just want to say that I appreciate simply seeing this idea in words in a forum. Lately it's just been positively weird how infrequently I see this very very obvious point of the whole thing.

What idea? The idea of "centralised actor" isn't even an idea, it's gibberish.

If it is gibberish, why do many people apparently think it makes sense? Are you using 'gibberish' to disparage something you dislike, rather than to describe something as nonsensical?

Re: BlockFi files for bankruptcy as FTX fallout spreads

#287

Post by twiddling »

aww_dang wrote: post #226
babypuncher wrote: post #204

Earlier quoted context omitted.

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.

I disagree on all points here. Not only did the US central bank create the conditions for the stock market crash of 1929, but the interventionist policies of FDR prolonged the economic hardship. Interventionism put the "great" in the "great depression". Not only did they create the bust, but they magnified the blast radius. https://cdn.mises.org/Americas%20Great%20Depression_3.pdf https://mises.org/library/did-fdr-ma…

Hmm. all the same source, as if there is an agenda...

Re: BlockFi files for bankruptcy as FTX fallout spreads

#288

Post by lottin »

halpmeh wrote: post #111
skrebbel wrote: post #27

Earlier quoted context omitted.

I’m not convinced there’s any destruction of value when the entire value proposition is a lie. When I tell you my lemonade stand is worth a billion, and you believe it for a while, and then you realize it isn’t really, no value was destroyed.

VC's had money, i.e. capital. Now the money is gone. What would you describe that as if not destruction of capital.

Money and capital are different things. Capital in a broad sense is any durable good that is employed in the production of goods and services. For example, a road. Money is not capital. Money is simply a good without intrinsic value that is used as a means of exchange. As a result creating and destroying money doesn't create or destroy wealth.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#289

Post by notch656a »

woah wrote: post #253
christiangenco wrote: post #235

My wife and I had about 10% of our life savings in BlockFi. This is a pretty big blow for us, especially while gearing up to start a family. It's easily in the top 5 worst things to happen to me in my life. Is there any hope of individual creditors getting any of their money back? I'm unfamiliar with how bankruptcy works.

Can I ask why? If you wanted to put money into crypto, why didn't you use a blockchain where you could verify your holdings and nobody could take them from you? BlockFi was just an incredibly shitty bank.

Even with 10% losses he lost less than those storing equity in ultra boring indexes.

Honestly anybody who only lost 10% in the last year looks like a genius (crypto included).

Re: BlockFi files for bankruptcy as FTX fallout spreads

#290

Post by phphphphp »

Yhippa wrote: post #22

Is Coinbase safe?

There's no such thing as "safe" or "unsafe" in an unregulated space (hence people saying "no") but if you're asking about relative safety then Coinbase is probably the safest of the centralised exchanges. The alternative to a custodian (like an exchange), self-custody, is "safe" in that it removes counterparty risk but it's "unsafe" in that you are now entirely responsible for keeping your coins in your control which means dealing with the risks of loss and theft.

A better question to ask is: what are you trying to protect yourself against, and what risks are you willing to take? Without insurance (whether that's government provided through a regulatory scheme (which does not exist in crypto), or personally through an insurance provider) you're exposed to a bunch of risks that can be minimised but not removed.

I don't own any cryptocurrency but if I did, I'd either use a specialist custody service or an exchange I trusted. If I was going to self-custody, it would involve multiple hardware wallets across multiple safe deposit boxes.

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